10-year US Treasury yield hits 19-year high

The yield on the 10-year US Treasury note rose on Tuesday, extending gains for a seventh consecutive session and hitting its highest level in 19 years after successfully breaking above the psychological 5% threshold for the first time since October 2023.

Global oil prices are currently trading near their highest levels in four months, a development likely to add to inflationary pressures facing Federal Reserve policymakers.

Markets are currently pricing in a 92% probability that the Federal Reserve will raise US interest rates by 25 basis points this week to counter mounting inflationary pressures in the United States.

US Treasury yields

The yield on the 10-year US Treasury note rose around 0.6% to 5.027%, its highest level since July 2007, from an opening level of 4.998%, while recording a session low of 4.983%.

The yield rose 0.6% on Monday, marking its sixth consecutive daily gain amid mounting inflationary pressures in the United States.

Global oil prices

Oil prices traded near their highest levels in four months on Tuesday, with Brent crude approaching the $110-a-barrel threshold for the first time since May.

The latest surge in oil prices this week comes after vital oil facilities in Saudi Arabia were targeted by the Houthis, fueling concerns over the security of global energy supplies.

This comes in addition to the exchange of attacks by the United States and Iran on oil tankers in the Strait of Hormuz and the Persian Gulf.

Federal Reserve

The Federal Reserve begins its monetary policy meeting later today, with its decision due on Wednesday. Expectations strongly favor a 25-basis-point interest rate hike, which would be the first increase in US interest rates since July 2023, while investors will also look for further clues on the evolution of inflation and the path of interest rates in the coming period.

US interest rates

• According to the CME FedWatch Tool, markets currently price an 8% probability that the Federal Reserve will leave interest rates unchanged at this week’s meeting and a 92% probability of a 25-basis-point rate hike.

• Markets currently price a 1% probability that the Federal Reserve will leave interest rates unchanged at its December meeting and a 99% probability of a 25-basis-point rate hike.

• The Federal Reserve’s quarterly Summary of Economic Projections, due on Wednesday, is expected to provide further clues about the future path of US interest rates.