Treasury Bond Yields Resume Their March Higher to End the Week — 2nd Update

By Paulo Trevisani and Emese Bartha

U.S. Treasury yields rose Friday as new indications of economic resilience fuel forecasts for a prolonged cycle of interest rate increases.

The 10-year benchmark reached 5.228%, its highest intraday level since June 2007, while the 30-year rose above 5.5% for the first time in 22 years, touching 5.531%. Both eased later, but remained near record highs.

Rates may have little room to keep rising as the length of the Federal Reserve's hiking cycle could be overpriced, a said Clayton Triick, head of portfolio management at Angel Oak Capital Advisors.

"I think the market is peaking when it comes to hawkishness," he said. "We do not feel that effectively a 5% [federal] funds rate is necessary to bring inflation back in the direction they want...We don't think the fed funds rate will get to that level if we had to make a call today."

The rise in Treasury yields has led to investors around the world to demand higher returns on government-backed debt. The 10-year UK gilt yield reached 5.527%, before receding to just below 5.5%. The 10-year German Bund yield rose to 3.625%, then slipped to 3.592%.

The Treasury yield increases follow an upward surprise in August durable goods sales in the U.S., which were unchanged from July, but beat a Wall Street Journal consensus forecast of a small decline. The data were stronger when stripped of volatile items such as aircraft orders.

"With capital expenditure in the driver's seat of this economic cycle, orders continue to be supported by defense and AI-related infrastructure investment rather than consumer- and housing-focused manufacturing," according to a report by William Blair Equity Research.

The University of Michigan consumer confidence index declined less than expected in September to 48.1 from August's 51.7. The survey showed inflation expectations increasing.

Friday's data follow indications from earlier this week suggesting that U.S. economic growth has been fast enough to require the Fed to hike borrowing costs more than previously expected. Money markets price in a 64% probability of a second consecutive Fed hike in October, in a cycle expected to extend into next year, according to LSEG.

The rise in yields came as oil prices pared early losses and were flat, with Brent hovering around $106 a barrel.

"A pullback in oil prices helped stabilize the situation," said Patrick Munnelly, market strategist at Tickmill Group.

The dollar weakened as oil prices dropped, but remained at elevated levels. The DXY dollar index, which measures the dollar against a basket of currencies, fell 0.3% to 101.

"The U.S. dollar and Treasury yields are holding close to recent highs as expectations for further Fed tightening continue to build," said Zaheer Anwari, co-founder and CEO at The Revacy Fund. Markets' repricing of Fed rate-hike expectations continues to support the dollar and shorter-dated Treasury yields, he said.

"As long as an October hike remains the market's base case, the dollar is likely to retain an upward bias," Anwari said.

The drivers of the bonds selloff may be unlikely to dissipate soon.

"The combination of fiscal, economic, geopolitical, and supply-side inflation pressures converging has bond markets in less familiar territory," said Mike Sanders, head of fixed income at Madison Investments.

Write to Paulo Trevisani at paulo.trevisani@wsj.com and Emese Bartha at emese.bartha@wsj.com

(END) Dow Jones Newswires

September 25, 2026 12:46 ET (16:46 GMT)