U.S. Treasury yields soared to 22-year highs on Thursday, driven by an escalating energy shock as Brent crude climbed toward $108 per barrel.
Sovereign Bond Yields Reach Multi-Decade Highs
Bond yields surge to fresh two decade highs as
Key U.S. Treasury yields surged significantly on Thursday, hitting levels not recorded in over two decades as the price of oil jumped to as high as $108 per barrel. The yield on the 30-year U.S. Treasury bond soared to 5.47%, a level not seen in 22 years. After posting its biggest one-day rise since April 2025, the yield on the 10-year U.S. Treasury bond continued advancing on Thursday. In early trading it climbed as high as 5.18%. That remains its highest level since 2007.
The sharp repricing in government debt is rippling rapidly through consumer credit markets. Due to the influence that the 10-year yield has over consumer borrowing rates, the average 30-year fixed mortgage rate jumped to 7.37% on Thursday, its highest level since May 2024. The pressure is not isolated to the United States. Global sovereign debt markets experienced severe turbulence as investors dumped bonds worldwide. “The acceleration higher in US rates yesterday is being felt globally as to highlight for the umpteenth time that we’re all in this global bond boat together,” wrote Peter Boockvar, chief investment officer at OnePoint BFG Wealth. The yield on Japan’s 10-year bond rose to its highest level since 1996 on Thursday, while Germany’s 10-year bund notched its highest yield since 2009.
Energy Markets Reel From Middle East Conflict
US, UK, and Japan face crucial rate decisions as
The ongoing conflict involving the U.S. and Iran continues to choke vital energy supply lines. Meanwhile, oil prices jumped again overnight after a mediated U.S. dialogue with Iran at the United Nations General Assembly produced no tangible evidence of any progress toward ending the seven-month war. Much of the day’s gains in oil were reversed shortly after midday Eastern time, following a Reuters report that U.S. and Iranian negotiators are exploring a phased path out of the war involving Tehran reopening the Strait of Hormuz, according to Reuters’ multiple unnamed sources. NBC News has not confirmed the Reuters report.
The reversal was short lived, however, and international Brent crude oil continued rising and closed higher by 3.4% at $106.60. U.S. crude oil ended the day higher by 2.6% at $94.61 per barrel. Since the start of the year, both Brent and West Texas Intermediary crude are up more than 65%. Those rising oil prices have continued to push commercial diesel fuel prices to all-time records. On Thursday, the national average price for diesel was $6.51, effectively unchanged from a day earlier, but up 73% since the Iran war began. Likewise, the national average price of regular unleaded gas was 50% higher Thursday than it when the U.S. and Israel attacked Iran in late February, at $4.48 per gallon.
Stocks fell in early trading, but like oil, sharply reversed course on the Reuters report. The S&P 500 erased a drop of 0.5%, while the Nasdaq Composite erased a 0.9% slip. Both indexes closed flat.
Stocks tumble as oil spikes, bond yields hit multi-decade
Central Banks Face Crucial Rate Decisions
Three of the world’s most influential central banks are lining up rate decisions in a single week. The Federal Reserve kicks things off on September 16, followed by the Bank of England on September 17 and the Bank of Japan on September 18, all while oil prices sit above $100 per barrel and bond yields are flashing levels not seen in nearly two decades. Global inflation has been reignited by the US-Iran conflict’s effect on energy supply chains, and Brent crude has climbed to $108 per barrel. Markets are pricing in a high probability that the Federal Reserve will raise rates by 25 basis points on September 16, which would be the first hike since the onset of pandemic-era monetary easing. Fed governor Michael Barr stoked expectations by saying decision-makers should be prepared to hike if inflation stays stubbornly above the bank’s two per cent target, noting, “If trends in the data give me some confidence that inflation is moderating on a path to two per cent, then I think we can take a bit more time to assess our policy stance.”
Meanwhile, the Bank of England held its policy rate at 3.75% in July with a divided 6-3 vote, and ten-year gilt yields have approached 5.4%, the highest in decades, while Chancellor John Healey prepares a budget under tight fiscal constraints. The Bank of Japan is expected to raise its policy rate from 1.00% to 1.25% on September 18 for its second rate increase in 2026, supported by strong wage growth.
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