The rise in U.S. long-term Treasury yields continues, with the 30-year yield reaching its highest level in 24 years. Following a record high for the 10-year yield the previous day, the overall burden of high long-term rates persists. Concerns over inflation driven by high energy prices and expectations of large Treasury issuances are pushing rates higher.
According to the International Financial Center, on September 29 (local time), the yield on U.S. 30-year Treasury bonds surpassed 5.6% during trading and closed at 5.57%, marking a 24-year peak. The 10-year yield remained stable at 5.24%, similar to the previous day. The day before, the 10-year yield jumped 8 basis points, reaching its highest level since 2007, indicating a continued surge in long-term rates. Factors contributing to the rise in long-term yields include inflationary pressures from high energy prices, expectations of significant Treasury issuances, and growth expectations linked to increased investment in artificial intelligence (AI).
Notably, there has been a marked correlation between international oil prices and U.S. Treasury yields recently. An analysis presented by the International Financial Center estimates that for every $1 increase in West Texas Intermediate (WTI) crude oil prices, the yield on 10-year Treasury bonds rises by approximately 0.02 percentage points. The correlation between these two indicators has reached 65%, nearing the 66% observed during the Gulf War in 1990. This suggests that rising energy prices are fueling inflation, which could prolong high interest rates, as reflected in the bond market.
However, in the latter part of the trading session, upward pressure on rates eased somewhat. Brent crude, which had surpassed $105 per barrel the previous day, fell by 2.56% to $102.59. John Williams, President of the Federal Reserve Bank of New York, indicated that while the possibility of additional rate hikes remains open, there is no need to rush, which has lowered expectations for an October increase.
Signs of economic slowdown are also constraining further rate increases. U.S. job openings in August totaled 7.089 million, falling short of both the previous month's 7.335 million and the expected 7.23 million. The consumer confidence index for September plummeted from 88.6 to 81.9, marking its lowest level in 12 years. The combination of high long-term rates and signals of economic slowdown contributed to a 0.17% decline in the S&P 500 index.
* This article has been translated by AI.
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