10-year Treasury yield rises to highest since January 2025 as surging oil rekindles inflation fear
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U.S. Treasury yields rose on Thursday as Brent crude oil rose above $100 a barrel, raising inflation fears and weekly jobless claims falling below 200,000.
The yield on the 10-year U.S. Treasury note, the key benchmark for mortgages, auto loans and credit card debt, was last up 5 basis points at 4.707%, the highest since Jan. 15, 2025, before President Donald Trump began his second term.
The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve interest rate policy, rose 6 basis points to 4.364%. The yield on the longer-dated 30-year Treasury note rose more than 3 basis points to 5.185%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
As oil prices continued to rise on Thursday, Brent crude oil contracts began posting their third biggest monthly gain in 10 years following reports of Houthi rebel attacks on tankers off Saudi Arabia’s Red Sea coast and renewed U.S. threats to step up attacks on Iran.
Brent crude futures for July delivery traded above $101 a barrel, up 7%; This is the highest level since the United States and Iran reached an interim peace deal last month. U.S. West Texas Intermediate crude oil futures rose 6% to above $92 a barrel.
As inflation fears grew, so did expectations that the Fed would raise interest rates; Fed fund futures investors price the probability of a rate hike at the central bank’s September meeting at 82%. CME’s FedWatch tool. This is a jump from 52% a week ago.
On the economic front, jobless claims totaled 187,000 for the week ending July 18, below the 212,000 expected by economists surveyed by Dow Jones. Investors will now wait for the latest S&P Global Flash US purchasing managers’ index report, which measures the economic health of American manufacturing and services sectors, to be released on Friday.
“The economy may be warming up today, but the road ahead for job markets could still be tougher as the escalation of war in the Middle East caused a U-turn in energy prices almost overnight this week,” said Chris Rupkey, chief economist at FWDBONDS. “Half of Federal Reserve officials are concerned enough about inflation risks to raise interest rates this year, but they still need to be wary of labor market risks, especially where jobs are increasingly difficult to find for new graduates.”
“The economy is not yet free from the dangers of growth, affordability crisis and high prices,” he added.
Government bond yields also rose in Asia and Europe on Thursday. The yield on Britain’s 10-year government bond rose 7 basis points to above 5.1% after the new prime minister, Andy Burnham, added to investor unease by reducing property taxes on accommodation.
Burnham’s 20% cut to business rates will cost around £100 million ($134 million) and is aimed at protecting pubs, clubs and music venues from higher costs.
— CNBC’s Chloe Taylor also contributed to this report.
