US Treasury yields moved sharply in different directions across the curve, with long-term yields rising on renewed inflation concerns while shorter-dated yields fell on signs of softer labour and consumer conditions, according to Kenanga Research.
The research house said Treasury yields moved between 13.3 basis points lower and 13.7 basis points higher over the week.
The 10-year US Treasury yield rose 4.3 basis points to 5.241%, while the two-year yield fell 13.3 basis points to 4.791%, resulting in a wider gap between short- and long-term rates.
Kenanga attributed the rise in longer-dated yields partly to escalating US-Iran tensions, which pushed energy prices higher and revived concerns that inflation could stay elevated for longer.
At the front end of the curve, yields eased after US consumer confidence fell to its lowest level since 2014, job openings softened in August and core personal consumption expenditure inflation came in below expectations.
Longer-term yields, however, were supported by firmer growth indicators, including an upward revision to second-quarter US GDP, resilient consumer spending, stronger private payrolls and lower jobless claims.
Kenanga expects Treasury yields to remain volatile in both directions in the near term, with upcoming US labour and inflation data likely to shape expectations for further Federal Reserve tightening.
The research house expects one more 25-basis-point Fed rate hike in the fourth quarter of 2026, with the timing dependent on September inflation data and developments in US-Iran negotiations.
It said weaker labour-market data would likely push Treasury yields lower, while stronger-than-expected readings could revive expectations of an earlier rate increase.
Investors will also be watching the ISM Services PMI, FOMC meeting minutes, ADP employment data and weekly jobless claims for further signals on the strength of the US economy.
Kenanga added that any progress in US-Iran talks could ease concerns over energy supply disruptions and help cap upward pressure on longer-dated Treasury yields.
