TLDR
- The US 10-year Treasury yield climbed to 5.342% on Thursday, its highest level since early 2002.
- The yield surpassed its old 2007 peak during the third quarter’s bond selloff.
- The 30-year Treasury yield also rose, trading near 5.64%.
- August PCE inflation data came in below forecasts, but core inflation stayed well above the Federal Reserve’s target.
- Odds of an October Fed rate hike dropped to around 37-38%, down from over 45% before the data.
The US 10-year Treasury yield reached 5.342% on Thursday. This is the highest level the yield has hit since early 2002.
The move came as a bond selloff picked up speed. The yield passed its previous high point from 2007. Investors are now watching to see how far this trend will go.
The global benchmark yield posted its biggest quarterly rise this century during the third quarter. That is a long stretch of history to beat.
The 30-year Treasury yield also climbed. It traded around 5.64% on Thursday, matching levels last seen in 2002.
What Is Driving the Selloff
Several factors are pushing yields higher. Energy prices remain elevated, which raises worries about inflation staying high for longer.
🚨WARNING: US Treasuries just posted their WORST month in four years, per FT.
The 10-year yield surged more than half a percentage point in September to 5.3%, the sharpest rise since September 2022.
The 30-year yield is trading at its highest level since June 2002.
Investors… pic.twitter.com/FycpiaSeqb
— Coin Bureau (@coinbureau) October 1, 2026
The US and Iran have made little progress in talks, even though Middle East oil flows appear to be recovering. This has kept oil prices near wartime highs.
Government debt levels are also rising. Weaker than expected bond buybacks have added more pressure on the Treasury market in recent weeks.
Patrick Munnelly, a market strategist at Tickmill Group, said rising government deficits and heavy Treasury bond supply are likely to keep pushing yields up. He also pointed to corporate debt tied to AI infrastructure spending as a factor.
Inflation Data Offers Mixed Signals
New inflation data was released this week. The PCE price index rose 0.3% in August. That was below expectations of a 0.4% increase.
Core PCE inflation rose 0.2% for the month. That number also came in below forecasts.
Looking at the yearly figure, core PCE inflation rose 3% over the 12 months ending in August. That is down from 3.3% the month before.
Even with the improvement, inflation remains well above the Federal Reserve’s 2% target. Bill Adams, chief US economist at Fifth Third Commercial Bank, said the inflation trend is lower but still not close to the Fed’s goal.
Adams added that the Fed’s next move will depend on September inflation data, which has not been released yet.
Other economic data also came in strong. Output figures showed the US economy grew faster than first thought in the second quarter.
Private sector job creation in September also beat expectations, according to ADP data.
Fed Rate Hike Odds Shift
Markets are now pricing in roughly a 37% to 38% chance of a Federal Reserve rate hike in October. That is down from over 45% before the inflation data came out.
Yields had dipped briefly after the inflation report was released. But the selloff resumed as investors weighed the mixed signals from the broader economy.
The two-year Treasury yield, which tracks interest rate expectations closely, moved to 4.893% by the afternoon.
Other global bond markets moved in the opposite direction. The 10-year German bund yield fell 5 basis points to 3.563%. The UK’s 10-year gilt yield slipped slightly to 5.392%.
Investors are now waiting on more US data. Weekly jobless claims are due Thursday, followed by the September jobs report on Friday. Both reports could shape expectations for the Fed’s next move.
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