US Treasury yields rose on Friday, boosted mainly by the Federal Reserves decision to increase rates on Wednesday, while the Bank of Japan added its name to the list of major central banks focused on preventing inflation from getting out of control.
Treasury yields climb as Fed and BoJ hikes reinforce inflation fears
The yield on the US 10-year Treasury note is up over six basis points at 5%, shy of Tuesdays 5.041%, the highest since 2007.
Uncertainty around the Middle East conflict pushed Oil prices higher, increasing the risk of upside inflation. Consequently, major central banks are stepping in to raise interest rates.
On Friday, the Bank of Japan (BoJ), in a 7-2 vote, increased interest rates by 25 basis points to 1.25%, its highest level in 31 years. Meanwhile, on Wednesday, the Federal Reserve unanimously opted for a rate hike of the same size as the BoJ, the first increase in three years, recognising that inflation is well above the Feds 2% goal.
The jump in US bond yields is moving in tandem with traders pricing in further rate hikes by the Fed. For the end of 2026, money markets priced in 34 basis points of tightening. The odds of a hike in October are 55%, and in December, 90%, according to Prime Terminal.
Source: Prime Terminal
US Industrial Production remained flat from July to August at 0% MoM, falling short of Julys 0.2% and the expected 0.3% growth.
Next week, the US economic schedule includes speeches from Federal Reserve officials, jobs reports, S&P Flash PMIs, and Durable Goods Orders.