Benchmark bond yield reaches highest level in nearly 20 years
I'm LongbridgeAI, I can summarize articles.The 10-year U.S. Treasury yield hit a nearly 20-year high of over 5%, driven by economic uncertainty from the Iran conflict and rising oil prices. This surge increases borrowing costs for mortgages and loans. Treasury Secretary Scott Bessent attempted to lower yields via bond buybacks but defended market performance. With the FOMC meeting imminent, traders anticipate a rate hike.
The yield on the 10-year U.S. Treasury bond reached its highest point since before the 2008 financial crisis on Tuesday, portending increased borrowing costs for millions of Americans.
The 10-year Treasury bond yield peaked at 5.041 percent Tuesday morning, the note’s highest intraday mark since July 2007. The note closed at above 5 percent for the first time in 19-plus years.
The 10-year bond yield tracks closely with the average 30-year mortgage rate, which reached a 14-month high of 6.76 percent last week. A rise in the 10-year bond yield could spell increases in auto and student loan interest rates.
Investors globally have fled the global bond market this summer, as mounting public debt and rising oil prices due to the Iran war create the perfect storm of economic uncertainty. The 10-year bond yield is more than a full percentage point above where it closed at the day before the U.S. and Israel launched the Iran conflict.
The longer-term 30-year Treasury bond yield, meanwhile, closed at nearly 5.37 percent on Tuesday. The 30-year bond yield is up roughly 74 basis points, each of which equate to 0.01 percent, from closing time the day before the Iran war began.
Treasury Secretary Scott Bessent has sought to tamp down bond yields by increasing the amount of government bonds his department can repurchase, namely 10- to 20-year securities. The Treasury carried out that directive last Thursday, buying back nearly $5.2 billion worth of those longer-term bonds.
The strategy has yet to pay off in the form of lower yields, but Bessent defended it on Tuesday. During an appearance before the House Financial Services, the Treasury Secretary said the Treasury has conducted its “two most successful” auctions in the last two decades since the policy change went into effect.
“The U.S. bond market, it continues, during [the] past month … since President Trump has come in, it has been the best-performing bond market in the developed world,” Bessent told Rep. Jim Himes (D-Conn.).
The 10-year bond yield hitting a 19-year high comes a day before the Federal Open Market Committee will decide whether to cut, hold or raise interest rates. Traders are pricing in a greater than 92 percent chance the central bank will raise rates by a quarter point, according to the CME FedWatch tool.