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Treasury yields hover near multi-year highs as energy prices and government debt fuel bond sell-off
Confirmed
In Short: Crude prices fell about 1%, retreating from more than one-month highs reached earlier in the session, after U.S.
Crude prices fell about 1%, retreating from more than one-month highs reached earlier in the session, after U.S. Energy Secretary Chris Wright said that more than 17 million barrels of oil flowed through the Strait of Hormuz on Monday.
Bond yields have been under pressure since the Iran war began earlier this year due to the disruption of oil supplies causing gas prices to rise, putting inflationary pressure on consumers.
State Street's head of macro strategy, Michael Metcalfe, said rising energy prices are causing traders to bet on interest rate hikes by the Federal Reserve to tamp down inflation.
Naka Matsuzawa, chief macro strategist at Nomura Securities, said the AI hyperscalers' willingness to pay reasonably high rates was pulling up yields broadly, with the focus now on whether economic growth can rise along with them to help economies cope with higher borrowing costs.
Published ahead of the central bank's September 15–16 policy meeting, the report revealed positive overall sentiment tempered by growing uncertainty around rising energy costs, tariffs, and Middle East conflict.
U.S. economic activity increased modestly, employment rose slightly, and prices grew at a moderate pace in recent weeks, according to the Federal Reserve's latest Beige Book report.
The Fed is set to hold its next monetary policy meeting in two weeks on Sept. 15-16, with markets seeing a 64.2% probability that policymakers will hike the benchmark federal funds rate by 25 basis points from the current target range of 3.5% to 3.75%, according to the CME FedWatch tool.
On the economic front, the ADP National Employment Report showed private employment rose by 38,000 jobs last month, below the 48,000 increase expected by economists polled by Reuters, after an upwardly revised 46,000 in July.
What's confirmed
What's still developing
- Those odds shifted dramatically over the last week, when the tool showed a 63.4% chance of rates remaining at their current level following the Fed's meeting this month.