Oil prices climb to late-May highs, while wholesale inflation data send benchmark 10-year yield closer to key 5% level
Treasury Secretary Scott Bessent speaks at the 2026 Republican National Convention on Wednesday. The Trump administration is trying to control rising yields.
Treasury yields were surging to fresh session highs Thursday after a poor auction of U.S. government bonds, and as Treasury Secretary Scott Bessent's first beefed-up buyback operation failed to calm the market.
The fresh tumult comes as traders also have grown more anxious about the latest jump in oil prices and inflation data on Thursday. That combination had the benchmark 10-year Treasury yield BX:TMUBMUSD10Y up 11 basis points to 4.95%, putting it in jeopardy of hitting the 5% threshold.
"Everybody is selling everything," said Tom di Galoma, a managing director at Mischler Financial Group, about the selloff in 2-year BX:TMUBMUSD02Y to 30-year BX:TMUBMUSD30Y Treasurys.
The Treasury Department bought back only about $5.2 billion in long-dated government bonds, di Galoma noted. He said that fed off disappointment a day before, when the Treasury underwhelmed traders with its plans to only buy back up to $6 billion. Market expectations were set on a bigger amount.
Furthermore, a $22 billion auction of 30-year Treasury bonds on Thursday went poorly, di Galoma added.
Adding to the angst in markets were Brent crude-oil futures (BRN00) rising above $105 on Thursday, feeding into inflation anxiety.
More broadly, higher yields matter because they increase the cost of capital. That's crucial right now because major technology and semiconductor companies at the heart of the artificial-intelligence boom have been driving the stock market's big gains over four years.
The AI build-out heavily hinges on borrowing, while major world economies also must compete for dollars as they issue debt to fund large deficits.
That tension added to the summer surge in U.S. bond yields, which prompted Treasury Secretary Bessent in August to intervene with plans to increase Treasury buybacks of long-dated bonds to keep a lid on rates.
This comes as both U.S. crude (CL00) (CL.1) and Brent futures were heading for their highest close since late May, according to Dow Jones Market Data.
The odds of a Federal Reserve interest-rate hike next week jumped to about 70% on Thursday after the inflation data, up from closer to 61% a day ago, according to the CME FedWatch Tool.
If the Fed doesn't hike rates next week, there's a risk that long-dated Treasury yields could become "unanchored" and more disorderly, said Ed Al-Hussainy, portfolio manager at Columbia Threadneedle.
Furthermore, Al-Hussainy said the Treasury and Fed likely will be more concerned about the potential for bond-market tumult to unleash financial stability concerns.
"There are no indications of this today," Al-Hussainy said. But it's something to monitor, he noted, given Thursday's violent moves in shorter-dated Treasury yields, fueled by the rising odds of a Fed rate hike and jolt higher in oil prices.
Stocks were lower for a fourth day on Thursday, with the Dow Jones Industrial Average DJIA off 0.7%, the S&P 500 SPX 0.6% lower and the Nasdaq Composite Index COMP down 0.6%, according to FactSet.
-Joy Wiltermuth