The yield on the 10-year U.S. Treasury note touched 4.75% intraday on August 31, a new high since January 2025. According to Reuters, after Warsh's hawkish speech on August 28, the two-year yield rose 12.8 basis points and the ten-year yield rose 5.6 basis points in a single day, indicating that expectations of interest rate hikes were a direct catalyst. Renewed tensions between the U.S. and Iran, and oil prices returning to around $90, further fueled concerns about energy inflation.
However, this sell-off is not solely about trading inflation. As of August 28, the 10-year breakeven inflation rate was approximately 2.31%, and the real yield was approximately 2.34%; the term premium for 10-year Treasury bonds had previously risen to approximately 0.87%. This means that the market is simultaneously demanding higher real returns, as well as compensation for fiscal, supply, and interest rate risks required for holding long-term U.S. Treasuries.
