U.S. Treasury yields, particularly the 10-year and 30-year, rose to levels not seen since 2007, with the 10-year yield hitting 5.08% and the 30-year yield reaching 5.38%. This surge was attributed to a combination of factors, including rising oil prices and robust economic data. European Brent crude exceeded $101 per barrel, while U.S. crude approached $92. Higher energy costs often contribute to inflationary pressures, which in turn can push bond yields higher.
Adding to the upward pressure on yields was a report from S&P Global indicating that U.S. business activity growth accelerated for the fourth consecutive month in September, reaching its fastest rate in over five years. Input costs for firms jumped at the steepest rate in four years, with fuel and transport expenses spiking due to the rise in oil prices. This data reinforced expectations of persistent inflation and the likelihood of additional Federal Reserve interest rate hikes.
President Trump's statements regarding a potential ban on U.S. diesel exports also impacted energy markets, with benchmark diesel futures surging as much as 7% in European trade. Energy industry representatives, including the American Petroleum Institute, warned that such a ban could lead to reduced refinery runs, global economic damage, and even higher domestic prices. Federal Reserve Governor Michael Barr further indicated that additional interest rate hikes would likely be necessary to control inflation.
The rising yields and oil prices led to a decline in stock markets. The Nasdaq Composite tumbled 1%, the S&P 500 fell 0.6%, and the Dow declined by 270 points. Inflation-sensitive sectors such as travel stocks, large technology firms, utilities, consumer discretionary, and real estate were among the biggest decliners. The average 30-year fixed-rate mortgage also rose to 7.17% as a result of the higher 10-year Treasury yield.
