10-year US Treasury yield rises above 5% for first time in three years

The yield on the 10-year US Treasury note rose on Monday, extending gains for a sixth consecutive session and hitting a fresh three-year high, breaking above the 5% threshold for the first time since October 2023.

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

Markets are currently pricing in an 86% 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 0.9% to 5.012%, its highest level since October 2023, from an opening level of 4.969%, while recording a session low of 4.949%.

The yield rose 0.25% on Friday, marking its fifth consecutive daily gain amid mounting inflationary pressures in the United States.

Global oil prices

Oil prices rose more than 5.0% on Monday, hitting their highest levels in four months, with Brent crude approaching the $110-a-barrel threshold for the first time since May.

The latest surge in oil prices comes as the United States and Iran exchange attacks on oil tankers in the Strait of Hormuz and the Persian Gulf, while vital oil facilities in Saudi Arabia have also been targeted by the Houthis.

Federal Reserve

The Federal Reserve begins its monetary policy meeting on Tuesday, 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

• Data released last week showed that US consumer prices accelerated in August, while a key measure of core inflation recorded its largest increase in four months.

• Following the data, according to the CME FedWatch Tool, the probability of the Federal Reserve leaving interest rates unchanged at its September meeting fell from 28% to 14%, while the probability of a 25-basis-point rate hike rose from 72% to 86%.

• The probability of the Federal Reserve leaving interest rates unchanged at its December meeting fell from 6% to 2%, while the probability of a 25-basis-point rate hike rose from 94% to 98%.