Treasury Yields Push To Fresh Highs — 4th Update

By Emese Bartha and Paulo Trevisani

U.S. Treasury and European government bond yields hovered around multiyear highs as investors remained concerned about long-term uncertainty.

The 30-year Treasury yield touched 5.612%, its highest intraday level since June 2002. The 10-year traded at 5.265%, on pace to settle at a 19-year high for the eighth time this month.

Yields have been rising on stronger-than-expected economic indicators released earlier this month, but on Tuesday the upward pressure remained despite lukewarm data. July home prices rose less than inflation, falling in real terms, for the 14th consecutive month, while August job openings were less than expected.

Consumer confidence surprisingly declined in September, with a growing number of respondents in the Conference Board survey anticipating higher interest rates over the next 12 months.

Oil prices slipped around 3%, but remain elevated, amid lingering Middle East tensions, supporting inflation worries.

Front-month Brent for November fell 1% at $104 a barrel.

Markets are also parsing remarks by policymakers to clarify the outlook for interest rates. On Tuesday, New York Fed President John Williams indicated that a hike in October isn't a done deal.

"With the policy action we took at our September meeting, there is no need for urgency," he said in a speech in Buffalo, N.Y. "We have time to gather more information."

The two-year Treasury yield, which is more reactive to monetary policy, dropped to 4.885% from 4.910% following his comments.

Yields, however, remain at high levels, leading some market participants to consider that the bond selloff has potentially gone too far.

"When you sort of do a bottom-up analysis of it: real growth potential plus inflation target plus some risk premium, you know, 5.27% on a 10-year is starting to sound attractive," said R.J. Gallo, chief investment officer of global fixed income at Federated Hermes. "Getting into this 5-handle realm, it's apt to produce some reallocation on the part of institutional investors into fixed income."

Gallo said bond buying could be triggered by any signal that yields are approaching an equilibrium.

In Europe, the bond selloff took a breather and the 10-year German Bund yield fell 4.5 basis points to a still high 3.601%.

Strong economic data, a resilient labor market, robust AI expenditure, easier fiscal policy, and persistent energy inflation are forcing markets to reconsider the level at which rates could find an equilibrium, said Mauro Valle, head of fixed income at Generali Asset Management, in a note.

"If the U.S. and Iran start to negotiate again, the 5% level could be a neutral one for the next few weeks," he said.

Yields remain under upward pressure from energy prices "as the U.S. and Iran appear to be stuck in their negotiations," Antti Ilvonen, senior fixed income and FX analyst at Danske Bank, said in a note.

High oil prices are fueling market expectations of further interest-rate hikes by the Federal Reserve following the one earlier in September. Money markets currently price in 100 basis points of Fed rate hikes over a 12-month horizon, according to LSEG.

Analysts said high yields also reflect the strength of the U.S. economy.

"The surge in the 10-year Treasury yield to approximately 5.25% reflects higher oil prices and a strong U.S. economy more than AI debt issuance or fiscal concerns," said James Reilly, senior markets economist at Capital Economics.

Eurozone bond yields can't take much comfort either from flash estimate data showing Spanish annual inflation at a three-and-a-half-year high of 5.0% in September, up from 4.6% in August.

Investors will likely assess U.S. data this week for clues on the trajectory of interest rates.

ADP's private payrolls report is due Wednesday, followed by weekly jobless claims Thursday and the key nonfarm payrolls report Friday. The PCE prices data, the Fed's preferred inflation measure, are also due Wednesday.

Markets are also likely to react to a full slate of Fed officials' speeches, which have been hawkish of late.

-- Jessica Coacci and Matt Grossman contributed to this article.

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

(END) Dow Jones Newswires

September 29, 2026 15:49 ET (19:49 GMT)