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Treasury yields surge, lifting bets for another Fed rate hike

The 10-year yield rose about 15 basis points to 5.11%, the highest in nearly 19 years, and October hike odds climbed to 66.4% from 55%.

Reported · Written up by our desk · Central Banks

U.S. stock index futures were sharply lower in Thursday trading, with Nasdaq futures down 1% and S&P 500 and Dow Jones futures also moving lower, as investors reacted to a jump in Treasury yields. LiveMint Markets said concerns about higher rates were compounded by sharp swings in crude oil prices.

According to LiveMint Markets, the benchmark 10-year Treasury yield jumped roughly 15 basis points to 5.11%, its highest level since 2007. The 2-year yield rose more than 11 basis points to 4.889% and the 30-year yield climbed about 9 basis points to its highest level since 2007.

Bond sentiment deteriorated after stronger-than-expected S&P Global manufacturing and services PMI data signaled robust economic activity, which in turn increased expectations for another Federal Reserve rate hike as early as October. LiveMint Markets also cited weak demand at a five-year Treasury auction and remarks from Fed Governor Michael Barr, who said additional rate hikes are likely needed to return inflation to the Fed’s 2% target.

After the Fed raised its short-term rate last week for the first time in three years, the odds of another quarter-point increase in October rose to 66.4% from 55% a day earlier, according to CME Group’s FedWatch tool. LiveMint Markets said investors were also watching U.S. President Donald Trump and China’s President Xi Jinping meeting later in the day at the White House, with discussions expected to include trade, the war in Iran, and artificial intelligence.

Latest closeWTI crude $91.79 ▼3.0%|S&P 500 7,706.03 ▼0.8%|Nasdaq Comp. 26,936.04 ▼0.7%

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