US 10-year Treasury yield nears 5% as oil prices surge and rate-hike bets rise

US Treasury markets weakened on Friday, pushing the 10-year yield to 4.97%, near the psychologically important 5% level and the highest since late 2023. The 30-year yield also climbed to 5.38%, a peak not seen since 2007, and the sell-off extended to Japanese government bonds. ING’s head of global rates and debt strategy, Padhraic Garvey, said the situation is troubling for bonds and could shift investor preference toward equities if yields stay above 5%, while a further rise toward 6% would be especially difficult for markets.

Brent crude futures rose about 1% to $108.68 a barrel, reflecting heightened concerns over Middle-East shipping disruptions and adding to inflation worries. The bond market turbulence comes ahead of the US consumer price index report, with the CME FedWatch tool indicating a 72% probability of a Federal Reserve rate hike next week, up from 49% previously. OCBC’s investment strategist Vasu Menon noted that softer inflation data could keep the Fed from raising rates, making the upcoming CPI figures a key focus for investors.