US Treasury yields climbed to multi-year highs at the start of the week, driven by renewed inflation fears and rising input prices, as indicated by the latest US Institute for Supply Management (ISM) survey. The 10-year Treasury note yield increased by more than 3 basis points to 5.307%, reflecting heightened concerns that elevated energy prices could push global bond yields even higher [1]. The ISM Services PMI dropped from 55.4 to 54.9, falling short of estimates of 55. Despite the overall slowdown in business activity, the survey noted improvements in new orders and employment sub-components, but companies continued to report higher costs through the prices paid index [1].
Global borrowing costs were further pressured by France's fiscal crisis, which contributed to a rise in global bond yields as investors grew increasingly worried about next year's budget outlook in France [1]. In the commodities market, West Texas Intermediate (WTI) crude oil prices fell over 2% to $89.29, following the G7's decision to release more than 100 million barrels of crude and diesel, which increased supply and alleviated some pressure on the US market. This move came as President Trump threatened to ban diesel exports [1].
Last Friday, US Treasury yields had eased after a weaker-than-expected jobs report, which showed job creation of 29,000, significantly below the forecast of 90,000 [1]. Looking ahead, traders are focusing on the upcoming ADP Employment Change 4-week average figures due Tuesday and the release of the FOMC monetary policy meeting minutes on Wednesday [1].
Recent cooler-than-expected inflation data has reduced the likelihood of a Federal Reserve interest rate hike this month. Money markets were last pricing in approximately a 76% probability that rates would remain unchanged at the Fed's October 27-28 meeting, according to Prime Terminal [1].
CONCLUSION
US Treasury yields surged to multi-year highs as inflation concerns resurfaced and global borrowing costs rose, influenced by both domestic and international factors. Market participants are now closely watching upcoming employment data and FOMC minutes, with expectations that the Federal Reserve will keep rates unchanged at its next meeting.