U.S. Treasury yields pushed toward multiyear highs Thursday as investors increased bets that the Federal Reserve may need to raise interest rates again. The 30-year Treasury yield briefly climbed to about 5.44%, its highest level since 2004, before easing slightly to around 5.40%. The 10-year yield also reached its highest level since July 2007, trading near 5.10%.
The latest move extends a sharp sell-off in government bonds that accelerated Wednesday following stronger-than-expected U.S. economic data, elevated oil prices and hawkish signals from Fed officials. Because bond prices move inversely to yields, the rise in borrowing costs reflects growing pressure across fixed-income markets. The selling has also spread overseas, with benchmark yields in Japan, Germany and the U.K. reaching fresh multiyear highs.
Markets are increasingly pricing in another Fed rate hike as policymakers continue to focus on bringing inflation back toward its 2% target. Futures tied to the federal funds rate showed more than a 75% probability of a hike at the October meeting, up from roughly 49% a week earlier. Investors are also pricing a series of additional increases through next year, underscoring how quickly expectations for monetary policy have shifted.
The surge in yields is being driven by a broader mix of concerns, including persistent inflation risks, strong economic activity, high energy prices, fiscal pressures and heavy government debt issuance. Michael Barr said Wednesday that further policy adjustments could be needed, while New York Fed President John Williams said Thursday that another rate increase before year-end would be reasonable. Together, the comments suggest that markets may be entering a period in which higher rates remain a central theme for investors.
