Treasury yields surge as inflation data points to tricky rates path
U.S. Treasuries rose Friday morning after a week of mixed inflation data as traders looked to price in interest rate policy under new Federal Reserve Chairman Kevin Warsh.
yield on 30 year bond It rose 8.6 basis points to just under 5.1%, approaching its highest level since May 22, 2025, and its highest level since October 2023.
yield on 10 year Treasury The note, the main indicator of US borrowing, rose 7 basis points to 4.55%.
Meanwhile, 2-year Treasury bill The yield, which tends to respond appropriately to short-term Fed interest rate decisions, rose more than 6 basis points to 4.06%.
One basis point equals 0.01%, and yields and prices move in opposite directions.
The jump in yields comes as Warsh, who was confirmed by the Senate on Wednesday, grapples with an increasingly complex inflation picture. Even though consumer prices and import data show prices are rising, President Donald Trump continues to press for an interest rate cut.
Reports this week showed that the consumer price index inflation rate was 3.8%, the highest since May 2023. Similarly, producer prices, which measure wholesale costs and point to inflation pressures, reached 6%, the highest annual rate since the end of 2022.
Separately, data released Thursday by the Bureau of Labor Statistics showed the cost of imports rose 1.9% in April and 4.2% on a 12-month basis as conflicts in the Middle East drove up energy prices and led importers to increase their costs. The annual import price increase was the highest since October 2022, while the 8.8% increase in export costs was the highest since September of the same year.
Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, wrote in a morning note that moves in the bond market are a reminder that “inflation is still an issue, debts and deficits (especially in the UK) are significant, and government bonds, predominantly owned by foreigners, are now a source of funds.”
“Long-term interest rates are now under the control of monetary policy,” he added. “I wish Kevin Warsh the best… but it will still depend on the macro circumstances surrounding him.”
Problems in the US bond market also reflect ongoing financial difficulties in the US
Although the government recorded a budget surplus of $215 billion in April (typical for the month in which tax collections arrive) this was 17% lower than in the same month in 2025. Financing issues continued to be a problem, with the $97 billion spent on debt interest costs being the second-highest expense after Social Security.
The increase in yields is not just a problem limited to the USA
German bonds also jumped; The 10-year yield was 3.127%, while benchmark Japanese government bonds rose 7 basis points to 2.69%.
Data expected to be released late Friday include the Fed’s monthly industrial production data as well as the latest New York state manufacturing activity index for April.
