10-year US bonds at 5 per cent: mortgages above 7 per cent
Yields are being driven up mainly by the rise in oil prices and fears of renewed inflationary pressures, on the eve of the Federal Reserve’s meeting
The yield on the 10-year US Treasury has hit 5 per cent: its highest level since 2023. Yields are being driven up mainly by rising oil prices and fears of renewed inflationary pressures, on the eve of the Federal Reserve’s meeting. The second key benchmark – the 30-year yield, to which US fixed-rate mortgages are linked – has also risen, reaching 5.35 per cent. The latter is a symbolic threshold – the same one that prompted the US Treasury Secretary, Scott Bessent, to announce a doubling of buyback operations on long-term securities last August. The recent movement has pushed the cost of mortgages in the US above the 7 per cent mark.
The market, fuelled by surges in oil prices, is therefore testing these levels further, with just a few hours to go before the Federal Reserve’s interest rate decision, scheduled for 16 September. So far, Governor Kevin Warsh has concealed his position behind skilfully vague language, even choosing to scrap forward guidance.
The futures market, however, has little doubt. Given the latest inflation figures (the core CPI published on Friday rose by 0.3 per cent month-on-month, which would correspond to an annual rate of 3.6 per cent), the probability of a rate rise has risen to 90 per cent.
Unlike previous sessions – in which the rise in yields was, however, accompanied by a simultaneous weakening of the dollar – today the greenback is also strengthening, with the dollar index up 0.5 per cent to over 99 points. This confirms a climate of reduced risk appetite, with the market on edge in light of upcoming market-moving events and growing tensions in the Middle East.
