The 10-year US Treasury yield reached its highest level since January 2025 as rising oil prices and inflation fears drive up borrowing costs.
The 10-year US Treasury yield rose to 4.71% on Thursday, marking its highest level since January 2025. This increase is driven by rising oil prices, persistent inflation fears, and the possibility of the Federal Reserve keeping interest rates higher for longer. Tensions between Washington and Tehran have pushed Brent crude to $100 per barrel, while the conflict has cost the United States $37.5 billion so far. Investors are increasingly turning to the debt of tech companies, such as AI hyperscalers, instead of traditional US Treasuries. This shift has kept 30-year bond yields above 5% for the longest period since 2008, making it more difficult for the government to finance its debt. Meanwhile, the bond market is adjusting to the leadership of new Fed chairman Kevin Warsh, who took over in May. Market analysts suggest that unless conflicts in the Strait of Hormuz and the Red Sea de-escalate, oil prices remain skewed to the upside. These factors combined are pushing up borrowing costs across the economy, including 30-year fixed mortgage rates, which reached a year-high of 6.58%.