The benchmark 10-year US Treasury yield surged above 5.021% on Sept 15, its highest level since mid-2007, as a spike in oil prices rattled bond markets ahead of crucial interest rate decisions from the US Federal Reserve (Fed) and Bank of Japan (BOJ).
According to Reuters, the yield extended its climb after touching 5% overnight, while Japan’s benchmark 10-year government bond yield pushed above 3% to a fresh 30-year high of 3.025%, underscoring mounting pressure across global debt markets.
Renewed concerns over Middle East oil supplies added to inflation worries after Yemen’s Iran-aligned Houthis launched a new wave of attacks on Saudi Arabia.
The escalation followed Riyadh’s accusation that Iran-backed fighters in Iraq attacked the kingdom’s east-west pipeline, potentially disrupting as much as 4% of global oil supply. Gulf Arab states also postponed planned talks with Iran.
US crude climbed 1.82% to US$103.24 a barrel, while Brent rose 1.6% to US$107.37.
Higher energy prices have intensified concerns that inflation could remain elevated, adding pressure on government bonds and pushing yields higher.
Attention now turns to the Federal Open Market Committee, which begins its two-day meeting later.
Markets are pricing in a 90% probability of a rate increase, which would mark the Fed’s first hike since mid-2023.
BOJ is also widely expected to raise its policy rate by 25 basis points to 1.25% on Sept 18 and signal further tightening as policymakers seek to support the yen.
