The United States saw its 10‑year Treasury yield spike to 5.04%, the highest level since 2007, as oil prices climbed and inflation concerns intensified.
The surge in global oil prices, driven by tensions in the Middle East and the US‑Israel conflict, pushed the benchmark wholesale oil price above $109 a barrel, up from about $86 at the end of August.
Higher oil costs have stoked worries that inflation will prompt the Federal Reserve to raise interest rates, a move that would further lift government bond yields.
In response to the rising yields, the Treasury has been buying back bonds, a strategy Treasury Secretary Scott Bessent described as “successful.”
Investors are also watching the Fed’s leadership, with Chair Kevin Warsh expected to consider rate hikes, while President Donald Trump has opposed such moves, arguing lower rates would boost the economy.
Tech giants’ heavy borrowing for data centres is adding pressure, as their debt costs can influence overall bond yields.
Carol Schleif, chief market strategist at BMO Wealth Management, noted that bond markets have been signalling for weeks that higher rates may be necessary, and that yields could stay elevated if geopolitical tensions and high energy prices remain at the forefront.
