U.S. Treasury, German Bund Yields Hit Multiyear Highs; Dollar Strengthens — 2nd Update

By Emese Bartha

Yields on U.S. Treasurys and German Bunds hit multiyear highs in midmorning European trade on Thursday, while the dollar rose to an eight-week high against a basket of currencies.

Increasing expectations that the Federal Reserve will raise interest rates further sparked the jump in Treasury yields which fed through into the dollar and European bond yields, particularly after Wednesday's stronger-than-expected U.S. purchasing managers' data for September.

The 10-year Treasury yield rose to 5.148%, the highest since 2007, while the 30-year yield increased to 5.444%, the highest since 2004, according to Tradeweb data.

The 10-year German Bund yield rose more than 4 basis points to 3.579%, its highest since 2009, while the DXY dollar index rose to 101.238, its highest since late July.

The 10-year U.K. gilt yield increased 6.1 basis points to 5.381%.

Thursday's moves marked an extension of massive selloffs of Treasurys in U.S. trading hours Wednesday, when yields rose by 10-15 basis points.

Growing expectations that the Federal Reserve will raise interest rates again after last week's hike are pushing Treasury yields higher and underpin strength in the dollar, DHF Capital S.A's Bas Kooijman said in a note.

Fed Governor Michael Barr said Wednesday that further rate increases are likely needed to ensure inflation comes down to target in a timely fashion.

"Rates are once again at the forefront of investor concerns, as long-term U.S. Treasury yields consolidate around or above the 5% threshold--a level that carries significant psychological weight for the markets," Raphael Thuin, head of capital markets strategies at Tikehau Capital, said in a note.

"The key question is whether this upward trend can continue and, even more importantly, whether financial markets and the economy as a whole can coexist with higher interest rates for the foreseeable future," he said.

Weak demand at Wednesday's auction of five-year Treasury notes also contributed to selling in Treasurys. The five-year notes sold on Wednesday at a yield of 5.033%, the highest since an auction held in June 2006, which had a high yield of 5.203%.

Jefferies' global economist Mohit Kumar said "stop outs and position unwinds" were also a major feature of Wednesday's selling.

"There appears to be a lot of pain on the street in fixed income," he said in a note. "The breakdown in correlation between oil, rates and risky assets suggests that yesterday's move was a dominant position squaring move, rather than driven purely by fundamentals."

The balance of probabilities suggests there is at least one more leg of weakness in long-dated bonds still to play out in the coming months, said Padhraic Garvey, regional head of research for the Americas and Michiel Tukker, senior U.K. and eurozone rates strategist at ING.

Investors will focus on the Treasury's $44 billion auction of seven-year notes and its $6 billion buyback auction of 20- and 30-year bonds on Thursday.

Write to Emese Bartha at emese.bartha@wsj.com

(END) Dow Jones Newswires

September 24, 2026 06:07 ET (10:07 GMT)