US Treasury yields hit multi-decade highs on Fed hike expectations

US Treasury yields have surged to multi-decade highs as expectations grow for further interest rate hikes by the Federal Reserve. The 30-year Treasury yield reached 5.501%, its highest level since 2004, while the 10-year yield climbed to 5.22%, the highest since June 2007.

This upward trend in yields is driven by strong economic data, hawkish comments from Fed officials, rising international oil prices, and geopolitical tensions. According to the CME FedWatch Tool, the probability of a rate hike at the October FOMC meeting has risen to approximately 70%, up from 49% a week prior. Federal Reserve Governor Michael Barr and New York Fed President John Williams have both suggested that further policy adjustments may be necessary to reach inflation targets.

The rising long-term rates are impacting the real economy, with US 30-year fixed mortgage rates exceeding 7%. This sell-off in the bond market has also spread globally; Japanese 10-year yields reached levels not seen since 1996, and German 10-year yields hit their highest point since 2009.