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US Treasury yields soar after strong data fuels bets on further rate rises
Confirmed
In Short: US Treasury yields surged to their highest levels since 2007, topping 5%, amid growing concerns over inflation and expectations of a Federal Reserve rate hike.
On September 10, the European Central Bank raised its key interest rates by 25 basis points, citing persistent inflationary pressures from the ongoing conflict with Iran.
The Bureau of Labor Statistics reported that employers added 162,000 jobs in August, with the unemployment rate holding steady at 4.1%, reinforcing positive signs in the labor market.
Jai Kedia, a research fellow at the Cato Institute, stated that a rate hike is likely given the resilient labor market and stubbornly high inflation.
The upcoming Federal Reserve meeting is expected to result in a 25 basis point increase in the benchmark interest rate, signaling a more challenging period for the economy.
The 10-year US Treasury yield climbed to its highest level since 2007, driven by a more than 3% jump in oil prices, which revived inflation worries.
The Bank of Japan raised its short-term interest-rate target to 1.25% from 1.00%, marking another step in the normalization of monetary policy.
Treasury Secretary Scott Bessent warned about the risks of testing Japanese yen intervention, while Fitch Ratings expects policy rates to rise faster than markets predict in 2026-2027.
Chicago Fed President Austan Goolsbee rejected calls for interest-rate cuts to ease the US government’s debt burden, warning that such a move could fuel inflation and raise borrowing costs.
If rates remain this high above projections, it would add an additional $2.3 trillion to the debt over the next decade, according to the Congressional Budget Office (CBO).
What's confirmed
- On September 10, the European Central Bank raised its key interest rates by 25 basis points, citing persistent inflationary pressures from the ongoing conflict with Iran.
- The Bureau of Labor Statistics reported that employers added 162,000 jobs in August, with the unemployment rate holding steady at 4.1%, reinforcing positive signs in the labor market.
- Jai Kedia, a research fellow at the Cato Institute, stated that a rate hike is likely given the resilient labor market and stubbornly high inflation.
- The upcoming Federal Reserve meeting is expected to result in a 25 basis point increase in the benchmark interest rate, signaling a more challenging period for the economy.
- The 10-year US Treasury yield climbed to its highest level since 2007, driven by a more than 3% jump in oil prices, which revived inflation worries.
- The Bank of Japan raised its short-term interest-rate target to 1.25% from 1.00%, marking another step in the normalization of monetary policy.
- Treasury Secretary Scott Bessent warned about the risks of testing Japanese yen intervention, while Fitch Ratings expects policy rates to rise faster than markets predict in 2026-2027.
- Chicago Fed President Austan Goolsbee rejected calls for interest-rate cuts to ease the US government’s debt burden, warning that such a move could fuel inflation and raise borrowing costs.
- If rates remain this high above projections, it would add an additional $2.3 trillion to the debt over the next decade, according to the Congressional Budget Office (CBO).
What's still developing
- It would also mean that Fed Chair Kevin Warsh, long viewed as an inflation hawk, may be willing to risk the ire of President Donald Trump, who is threatening to halt trade with America’s key partners if the Fed doesn’t cut rates.
- During election years between 1972 to 2024, the Fed has generally been less likely to adjust interest rates in the weeks leading up to Election Day, according to a historical analysis by CME Group, a global derivatives marketplace and financial markets company.
- The meeting comes amid recent concerns over rising government debt, with a global bond sell-off pushing yields to multi-year highs, while energy prices have surged amid the ongoing war with Iran.
- The following day’s consumer price index, or CPI, report by the Bureau of Labor Statistics showing that inflation remained elevated at 3.4% in August was the final major data point of the week to factor into expectations for the Fed’s decision on Sept.
- A rate hike could mark a significant shift in the Fed’s approach to an economy confronting the competing pressures of persistent price increases and a still-resilient labor market.
- Markets are expecting the Federal Reserve (Fed) to raise rates on Wednesday, with investors leaning toward a 25 basis points (bps) hike to 3.75%-4.00%, and the risk-off tone has weighed on growth-sensitive currencies like the New Zealand Dollar (NZD).
- A broadly firmer US Dollar (USD) is behind the slide, with the greenback supported by climbing United States (US) yields and rate-hike expectations.
- "Fitch expects policy rates to rise faster than markets are predicting in 2026-2027, further supporting the yen and JGB demand." (This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.
- Fitch Ratings adds that rising JGB yields and expected faster policy rate hikes in 2026–2027 should support the Yen and domestic bond demand over time.
- The more important response must come from the BoJ, particularly through establishing a tightening cycle that extends well beyond September." "This week’s data confirming Japanese selling of U.S.
- Treasurys have had little immediate market impact, but the headline numbers underscore the risks to U.S.
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