US Treasury yields climb as Fed and Wall Street split over the cause
The 10-year yield reached 4.814% and the 30-year yield 5.28%, as policymakers pointed to economic strength while investors focused on oil, inflation and government debt.
Long-term US Treasury yields have risen to multi-year highs, opening a divide between Federal Reserve officials and Wall Street over what is driving the move.
The 10-year yield reached 4.814% during the week, its highest level since November 2023, before easing. The 30-year yield reached 5.28%. Oil prices also rose above US$95 a barrel amid renewed military strikes in the Middle East.
New York Fed president John Williams attributed the rise mainly to the strength of the US economy and a positive outlook, supported by investment in artificial intelligence, data centres and technology. He said higher funding costs reflected demand to finance that investment, while acknowledging that oil prices and the Middle East conflict could increase the compensation investors seek to hold longer-term debt.
Fed officials including Kevin Warsh have similarly pointed to robust growth, business investment and consumer spending. Former International Monetary Fund chief economist Ken Rogoff said yields may have reset towards historically normal levels after the period of so-called secular stagnation.
Wall Street analysts offered a broader set of risks, including persistent inflation, higher oil prices, fiscal deficits, government debt, a weaker US dollar and technology-company bond issuance competing with Treasuries. FedWatch Advisors chief investment officer Ben Emons said the 10-year yield could finish the year above 5%, while the 30-year yield could reach 5.5% or higher. Fed governor Chris Waller also said fiscal deficits of 6% of GDP, or 3% adjusted for inflation, were unsustainable and could lead investors to demand higher yields.
