US Treasury yields climbed again Monday as a renewed jump in oil prices revived inflation concerns, while investors prepared for key economic data that could shape expectations for another Federal Reserve rate hike.
US Treasury yields moved higher on Monday, extending a global government bond selloff as rising oil prices and renewed US-Iran tensions increased concerns that inflation could remain elevated.
The benchmark 10-year Treasury yield rose to around 5.21%, while the 30-year yield reached roughly 5.52%, according to market reports. The 30-year rate moved close to its highest level since 2004, while the 10-year yield remained around its highest levels in nearly two decades.
The latest move came after President Donald Trump rejected an Iranian proposal connected to reopening the Strait of Hormuz. The development pushed Brent crude above $106 a barrel and reinforced concerns that higher energy costs could keep inflation pressures elevated.
The bond market's reaction follows an already difficult September for longer-dated US government debt. Wealthier Today's recent coverage of the Treasury selloff documented the previous jump in the 10-year and 30-year yields as oil prices and Federal Reserve expectations shifted.
Oil Prices Put Fresh Pressure on Treasury Yields
The latest move in Treasury yields is closely connected to the renewed rally in crude oil.
Brent crude futures climbed more than 3% on Monday to above $107 a barrel, while oil remains nearly 50% above its level before the conflict began in late February, according to Reuters.
Higher oil prices can complicate the inflation outlook because energy costs feed directly into household and business expenses and can also raise transportation and production costs.
For bond investors, the concern is that a sustained increase in energy prices could make it harder for inflation to return to the Federal Reserve's 2% target. That can reduce expectations for monetary easing and increase the yield investors demand to hold longer-dated government debt.
The relationship between oil and Treasury yields has become particularly visible during the current market cycle. When crude prices declined last week on expectations that Middle Eastern supply disruptions could ease, Treasury yields temporarily stabilized. When oil reversed higher Monday, bonds came under renewed pressure.
The move also comes after the Federal Reserve raised its benchmark interest rate by 25 basis points on Sept. 16 to a target range of 3.75% to 4%. The central bank said economic activity was expanding at a solid pace while inflation remained elevated.
That policy backdrop has left investors particularly sensitive to evidence that inflation could remain above target.
The two-year Treasury yield, which is generally more sensitive to expectations for Federal Reserve policy, also moved higher Monday, reaching around 4.92% in early trading.
Jobs and Inflation Data Could Set the Next Direction
The Treasury selloff is unfolding just as markets enter a data-heavy part of the calendar.
The August personal income and outlays report, which includes the Federal Reserve's preferred inflation gauge, is scheduled for release on Sept. 30, according to the Bureau of Economic Analysis.
The September employment report follows on Oct. 2, when the Bureau of Labor Statistics is scheduled to publish payrolls, unemployment and wage data.
Those reports could provide new evidence about whether the US economy is retaining enough momentum to keep inflation pressures elevated.
The latest Federal Reserve projections already point to a higher policy-rate path than policymakers anticipated earlier in the year. The September projections put the median federal funds rate at 4.1% at the end of 2026, although individual officials' expectations varied.
Recent comments from Federal Reserve officials have also kept the possibility of another increase in focus. John Williams, president of the Federal Reserve Bank of New York, said that another rate hike before year-end could be reasonable if inflation remains too high, while emphasizing that incoming economic data would guide the timing.
The combination of higher oil prices, rising yields and a potentially firmer Federal Reserve policy path is also affecting other markets. Gold fell sharply Monday as higher Treasury yields and a stronger dollar reduced demand for the non-yielding asset.
For the Treasury market, the immediate focus remains on whether the latest rise in energy prices proves temporary or persists long enough to alter inflation expectations.
The US bond selloff is therefore entering a critical week. With the 10-year yield above 5%, the 30-year yield near a two-decade high and major inflation and employment reports ahead, incoming data could determine whether the recent rise in borrowing costs extends further or begins to stabilize.