10-year Treasury yield climbs to highest level since January 2025 as $100 oil sparks inflation fears
10-year Treasury yield climbs to highest level since January 2025 as $100 oil sparks inflation fears.
What happened: Bond yields continued to climb on Thursday as oil prices rose amid an escalating conflict in the Middle East.
The 10-year yield ( ^TNX ), used as a benchmark for mortgage and loan rates , rose to 4.7% on Thursday, the highest level since January 2025.
The 30-year yield ( ^TYX ) climbed to 5.19%, its highest level since May. The long-dated bond notched its longest stretch above 5% since 2007, the year prior to the financial crisis.
Why it's important: Yields on the 10-year and 30-year remained above key psychological levels, raising concerns about mounting debt and sticky inflation, as Brent crude ( BZ=F ) futures on the Intercontinental Exchange jumped to $100 per barrel on Thursday.
The jump occurred after reports of tank strikes off the coast of Saudi Arabia amid escalating fighting between the US and Iran.
What are the inflation implications of current market conditions?
What's keeping stock markets resilient despite rising yields?
What else you need to know: Over the past couple of weeks, investors have largely shrugged off rising oil prices as artificial intelligence became the central theme of economic and market growth.
"The resilience of equities despite a 10-year Treasury yield of 4.65 percent and crude oil prices at $87 per barrel can be attributed to the fact that uncertainty, as measured by ten-day realized volatility, remains low," Michael Kantrowitz, chief investment strategist at Piper Sandler, wrote in a note earlier this week.
Another factor keeping the stock market resilient is earnings growth.
"As is widely understood, earnings serve as the foundation of equity valuations, and these estimates continue to trend higher," Kantrowitz wrote.
The rise in bond yields comes as worries over a Federal Reserve rate hike this year have eased, given recent softer-than-expected inflation prints.
Read more: What experts say about the possibility of rate cuts this year
However, rising oil prices threaten to reignite inflation, which could prompt the Fed to tighten policy this year.
But increasingly, investors may be anticipating that the Federal Reserve will need to tighten monetary policy, with Polymarket bettors assigning a 71% probability of a rate hike in 2026.
"While the June CPI report reduced the urgency for the Fed to raise interest rates, an assessment of the broader inflation picture suggests that at least one rate hike remains the base case for this year," the Yardeni Research team wrote in a note on Monday.
Investors are closely watching incoming economic data for clues about the outlook for inflation and monetary policy. Higher energy costs can feed through to consumer prices, potentially slowing progress toward the Fed's 2% inflation target.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre .
