Volatility continues in the bond market with the yield on the benchmark 10-year Treasury rising above 5% and hitting its highest level since 2007.
The situation has been prompted by a continued selloff in U.S. government debt ahead of the Federal Reserve’s interest rate decision on Sept. 16.
The American central bank is widely expected to raise interest rates by 25 basis points as it tries to lower inflation that remains stubbornly above its 2% annualized target.
On Sept. 15, the yield on the 10-year Treasury stood at 5.004%. One basis point equals 0.01 percentage point and yields and prices move in opposite directions.
The yield on the 30-year Treasury bond, which is more sensitive to geopolitics, rose five basis points to 5.381%. The two-year Treasury yield has climbed three basis points to 4.663%
The moves in the bond market come with financial markets now pricing in a 92% chance that the Federal Reserve will raise interest rates by 25 basis points at its latest policy meeting.
The close relationship between rising crude oil prices and U.S. government Treasury bonds is adding further upward pressure on yields, say analysts.
Efforts by U.S. Treasury Secretary Scott Bessent to intervene in the bond market and spend billions of dollars buying U.S. Treasurys has not worked and yields continue to rise.
Rising yields make government bonds more attractive to investors and can lead to an exodus of capital from riskier stocks, putting downward pressure on equity markets.
News of the rising U.S. Treasury yields has all the major U.S. indices in negative territory on Sept. 15.
