10-year Treasury yield rises to highest since 2007 as Fed rate-hike expectations rise

10-year Treasury yield rises to highest since 2007 as Fed rate-hike expectations rise. The benchmark 10-year Treasury yield climbed to its highest level since 2007 on Tuesday as a sell-off in U. S. government debt deepened ahead of the Federal Reserve's interest-rate decision.

What happened

The yield on the longer-dated 30-year Treasury bond hit its highest level since June 2007. Brendan McDermid | ReutersThe benchmark 10-year Treasury yield climbed to its highest levels in 19 years on Tuesday as oil prices surge from the Iran conflict and expectations grow that the Federal Reserve will raise interest rates on Wednesday. The rate milestone could ripple through the economy as the 10-year yield is a benchmark for consumers loans and corporate funding. 10-year TreasuryThe yield on the longer-dated 30-year Treasury bond, more sensitive to geopolitical risks, rose 4 basis points to 5.

The 2-year Treasury note yield climbed more than 1 basis point to 4. The tight relationship between oil and Treasurys could add further upward pressure on yields if crude prices remain elevated, as higher energy costs feed into inflation expectations, experts told CNBC. watch nowVIDEO6:1106:11'Pain point' for U. S. yields: Tikehau CapitalSquawk Box EuropeThe one-month rolling correlation between front-month West Texas Intermediate crude and the 10-year Treasury yield has climbed to 0.

The wider picture

Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuKey PointsThe 10-year yield reached 5. The 10-year yield was last up more than 3 basis points to around 5%. It had earlier reached its highest level since July 2024 at 4. The move comes at the start of the Fed's two-day policy meeting, with markets pricing in higher chances of a quarter-point rate hike when the meeting concludes Wednesday after August inflation remained well above the central bank's 2% target. 10-year treasuries are highly sensitive to inflation expectations, and with inflation gauges still above the Fed's target of 2%, we believe this tight correlation will likely persist for a while," said Jonathan Liang, Standard Chartered's CIO of fixed income and FX.

After surging during the onset of the war earlier in the year, crude oil traded below $70 a barrel in July on expectations an MOU signed by U. "Speaking simplistically, higher oil prices lead to higher inflation expectations and vice versa," said Steve Sosnick, chief strategist at Interactive Brokers. 01 percentage point, and yields and prices move in opposite directions.

What has been reported

Traders are pricing in a more than 92% chance that the Fed will raise rates by 25 basis points in its latest meeting, according to the CME FedWatch tool. "As long as oil prices remain firm and continue to drift higher, this will add pressure to interest rates. 1Follow your favorite stocksCREATE FREE ACCOUNTTraders work on the floor at the New York Stock Exchange (NYSE) in New York City, U. WTI crude oil was higher again on Tuesday, topping $102 a barrel as the Iran conflict drags on and the Strait of Hormuz remains essentially blocked.

S. and Iran would lead to a de-escalation in the conflict. S. restarted attacks and oil inventories declined. Diesel gasoline, used by trucks and other key transport for the economy, recently topped $6 a gallon, further flaring inflation concerns. "Normally, the relationship isn't as clean as it is now, but the geopolitical drivers behind the price of oil and global inflation are so prominent that the normally modest correlation has become much tighter," he told CNBC.

What happens next

"To be sure, National Economic Council Director Kevin Hassett told CNBC on Tuesday that he believes inflation is showing signs of cooling. "If you look at the sort of near-term memory and the stochastic process that drives inflation, then you can see that things are slowing down," he said during a "Squawk Box" interview. "That would be the argument that one would make if you were going to dissent tomorrow. But again, we respect the decision that the Fed makes.

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