Global bond markets remained under pressure as surging oil prices sent yields to multiyear highs.
The U.S. 10-year Treasury yield traded as high as 4.921% Thursday, its highest intraday level since October 2023, as U.S. oil prices topped $100 a barrel and prices for the global benchmark Brent hit $105.
U.S. wholesale inflation rose 0.4% in August, while existing home sales in August fell to their lowest level in more than a year. Market participants' focus is now on tomorrow's consumer price index print. Economists polled by The Wall Street Journal are expecting consumer-price inflation to increase 0.4% in August up from 0.1% in July.
Rate hike projections are nearing 70% for the Federal Reserve's interest rate meeting next week, according to CME's FedWatch tool. A lower-than-expected CPI print tomorrow would strengthen the case for holding rates steady.
"Barring a surprise in the CPI number on Friday, we expect the economic data to support the case for a hold at next week's Federal Open Market Committee meeting," wrote Grace Zwemmer, U.S. economist at Oxford Economics.
Inflation worries also rippled throughout global markets. The European Central Bank raised interest rates for the second time this year, with resurgent energy prices sparked by the war in Iran intensifying price pressures. The 25 basis-point increase was in line with what market participants were expecting.
The U.K. 10-year gilt sits around 5.380%, above 5.295%, the highest level since 2007. The German Bund 10-year yield sits around 3.496%, above 3.451%, its highest since 2011. The U.S. 30-year Treasury yield also rose as high as 5.353%, its highest intraday yield since June 2007.
Elevated U.S. Treasury yield levels put focus on the first buyback auction with increased volume. Treasury said it would buy back up to $6 billion in long-term bonds Thursday after announcing it would increase buyback sizes in August.
"The price action could reflect some initial disappointment that the size of the bond buyback was not even bigger," Lee Hardman, senior currency analyst at MUFG, said in a note.
The increased buyback volume will be in effect for the remainder of the Treasury's current refunding quarter, through November 4. Treasury said it would provide more information about future buyback sizes at the next quarterly refunding, scheduled for November 4.
"Admittedly, it is highly uncertain how long the bigger purchases will be sustained and it is possible the size of operations could even be increased further going forward," Hardman said.