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Treasury rates spiked on Wednesday to multiyear highs in what was the biggest one-day move for the 10-year Treasury yield in nearly 18 months. There were a number of reasons cited for the sudden move higher: - Much stronger-than-expected surveys on U.S. economic activity, especially in the manufacturing sector - Hawkish commentary from a top Federal Reserve official - A U.S. Treasury auction for five-year notes that was met with poor demand - Stubbornly high oil prices with WTI crude rising 2% The 10-year Treasury note yield popped more than 13 basis points to 5.104% and reached a level not seen since July 2007. The move gained steam after the 10-year yield broke through the key 5% level. It marked the benchmark yield's biggest one-day move since April 7, 2025 — when it surged 16.6 points. The 2-year Treasury note yield, which is most sensitive to expected changes in Fed policy, jumped more than 11 basis points to 4.889% and hit its highest level since May 2024 as traders increased their bet the Federal Reserve would need to hike again in October. The 30-year Treasury yield gained more than 9 basis points to 5.398%. It hit the highest level since June 2007. One basis point is equal to 0.01%, and yields and prices move in opposite directions. "This is the market telling us we've entered a genuine re-tightening cycle, said Tony Miano, global investment strategy analyst at Wells Fargo Investment Institute. "The Fed's 25 basis point hike last week to 3.75%–4% was its first increase since 2023, and the dot plot signaled another this year." "A week ago you could argue that was a one-and-done insurance move or a one and maybe December hike). Today's price action says investors no longer believe that," he added. Bottom line, "you can't fool or hide in the bond market – unless the Fed gets inflation under control the long end of the curve is going to continue to come under pressure." Purchasing managers' indexes are typically not huge market movers, but Wednesday morning's readings from S&P Global caught the market off guard. The firm's services PMI jumped to 58.7 in September, its highest level in nearly five years, from 56.5 in August. Its manufacturing counterpart raced to 56.7, a level not seen in more than four years. PMIs are surveys of managers in different sectors across the economy. "US business continues to boom," S&P Global Market Intelligence chief business economist Chris Williamson said in a statement. "To put the growth surge in context, barring the spike in demand following the opening up of the economy after the COVID-19 lockdowns, the latest improvement in business activity is the greatest recorded since early 2015. Business is clearly booming now in both manufacturing and services." "Input costs have meanwhile jumped in September at the steepest rate for four years, with fuel and transport costs spiking higher thanks to the rise in oil prices," he added. Barr's warning, poor auction Comments from Fed Governor Michael Barr then added even more upward pressure to yields. "In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," said Barr. "We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that." Following the first Fed rate hike in more than years last week, odds of another quarter-point rate increase in October rose Wednesday to 66.4% from 55% a day before, per the CME Group's FedWatch tool. Those chances stood at less than 10% a month ago. Traders also contended with a much weaker-than-expected Treasury Department auction of 5-year notes. According to BMO, the sale concluded with a yield of 5.033% — far above a six-auction average of 4.186%. Indirect bidders, which include global central banks, scooped up 54% of the auction, well below a 65% average. "Bottom line, a poor auction with Treasury trying to sell paper into a weak market and where yields weren't attractive enough to bring in the buyers," Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, wrote in a Wednesday note. "The bond bear market continues on." At the heart of the move higher in yields are persistently higher oil prices. Brent futures rallied 3.86% to settle at $103.08 per barrel, while U.S. crude gained 1.81% to settle at $92.16 per barrel. Oil prices have been soaring this year as the U.S.-Iran war continues, sparking fears of sticky inflation — which may lead to more Fed rate hikes.
document fetched 2026-09-24 02:51 · canonical https://cnbc.com/2026/09/23/treasury-yields-oil-inflation-fed.html