US Treasury yields hit 2007 highs as strong PMI and oil surge fuel rate hike bets
US Treasury yields surged to multi-year highs on September 23-24, with the 5-year yield above 5% and the 10-year yield above 5.1%, the highest since 2007. The selloff was driven by stronger-than-expected September PMI data (58.4, highest since July 2021), a rebound in oil prices above $103/barrel after Iran refused to reopen the Strait of Hormuz, and a weak 5-year Treasury auction. Market odds for a Fed rate hike at the October 27-28 meeting rose to 68.6-70.9%, up from 53% the previous day.
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Cross-source coverage
Common ground
- Central bank gold purchases and BRICS payment system discussions are real trends, not just noise.
- The US sanctions regime has created incentives for countries to build alternative financial systems.
- The bond market is signaling a loss of Fed credibility and concerns about the US fiscal trajectory.
- The dollar's share of global reserves has declined from 71% to 59% over a decade, showing gradual diversification.
Points of contention
- Whether the current bond market turmoil is a cyclical correction or a structural unraveling of US financial hegemony.
- Whether the US economy is experiencing stagflation or an overheating economy with supply constraints.
- Whether the dollar's reserve status is at risk of collapse or just facing a slow, manageable rebalancing.
- Whether the 5-year auction's low bid-to-cover ratio signals a deteriorating credit profile or normal price discovery.
Blind spots
- Both sides underestimated how quickly geopolitical shifts, like Saudi Arabia testing yuan oil contracts, could accelerate de-dollarization.
- The debate lacked a deep look at how rising US interest payments could crowd out other government spending and affect social stability.
- Neither side fully addressed the role of technology, like digital currencies, in reshaping the global financial system.
WorldAttention’s read
The roundtable agreed that the US faces real challenges: the Fed has lost some credibility, the fiscal path is unsustainable, and countries are slowly building alternatives to the dollar. However, they disagreed on whether this is a slow rebalancing or the start of a systemic collapse. The Eastern Agent argued that the trajectory points to the end of US financial hegemony, citing gold purchases and yuan oil contracts as evidence of a structural shift. The Neutral Agent countered that the dollar still dominates due to deep capital markets and rule of law, and that the bond market is pricing a policy error, not a sovereign debt crisis. Both sides acknowledged that the US has time to fix its problems, but that time is not unlimited. The key blind spot was how quickly geopolitical incentives and new technologies could accelerate change beyond what current data shows.
Reporting timeline
Strong US September PMI Fuels Overheat Fears, Pushing Treasury Yields to 2007 Highs
US Treasury yields surged across the board on September 23, with the 5-year and 10-year yields reaching 5.032% and 5.133% respectively, the highest since 2007. The 2-year yield hit 4.94%, a new high since May 2024. The move was driven by stronger-than-expected economic data, particularly the S&P Global US Composite PMI for September, which rose to 58.4 from 56.0 in August, the highest since July 2021. FHN Financial macro strategist Will Compernolle described the data as showing the economy is not just resilient but showing signs of overheating, potentially adding to inflationary pressures. A rebound in oil prices, with Brent crude rising 4.28% to $103.50 per barrel, further fueled inflation concerns. Fed Governor Michael Barr characterized the recent rate hike as a 'recalibration' and signaled the possibility of further tightening. Market pricing for an October rate hike rose to 70.9% from 53% the previous day, according to CME FedWatch. Additionally, a weak 5-year Treasury auction, with a bid-to-cover ratio of 2.21 (the lowest in 12 months) and a tail, added pressure. Analysts from Interactive Brokers, SEI Investments, and ABN AMRO noted that strong data, supply, and sticky inflation are driving yields higher, with spillover effects seen in Japan's 10-year yield rising to 3.073%.
Read sourceOil Surge, Bond Rout Fuel Fed Rate Hike Bets; October Odds Near 70%
A sharp selloff in US Treasuries has driven five-year yields above 5% for the first time since 2007, and ten-year yields above 5.1% to 19-year highs, as a rebound in oil prices and stronger-than-expected US PMI data fueled expectations of further Federal Reserve tightening. The selloff was triggered by a reversal in oil market sentiment after Iranian officials stated they would not reopen the Strait of Hormuz or negotiate unless their conditions are met, sending Brent crude above $103 per barrel. A weak 5-year Treasury auction and a surge in the September S&P Global US Composite PMI to 58.4, its highest since July 2021, added to the pressure. The PMI's new orders and input price indices also rose sharply, with the latter hitting a near-four-year high. Following the data, the CME FedWatch Tool showed the probability of a 25-basis-point rate hike at the Fed's October 27-28 meeting rising to 68.6%, up from about 53% before the release. Fed Governor Michael Barr added to the hawkish tone, stating that further policy adjustments are likely needed to ensure inflation returns to target.
Read sourceOil Surge, Bond Rout Push Fed October Rate Hike Probability Near 70%
A sharp selloff in US Treasuries drove yields to multi-year highs, fueled by a rebound in oil prices and stronger-than-expected US PMI data. The 5-year yield breached 5% for the first time since 2007, while the 10-year yield rose above 5.1%, a 19-year high. The selloff was triggered by Iran's refusal to reopen the Strait of Hormuz or negotiate, reversing earlier oil price declines. Brent crude rose over 5% to $103.7 per barrel, and WTI gained over 3% to $92.69. The US Treasury's 5-year note auction saw weak demand, with a bid-to-cover ratio of 2.21, below the six-month average of 2.33. The September S&P Global US Composite PMI surged to 58.4, the highest since July 2021, with input costs rising at the fastest pace in four years. Following the data, the CME FedWatch Tool showed the probability of a 25-basis-point rate hike at the October 27-28 FOMC meeting rising to 68.6%, up from about 53% before the release. Fed Governor Michelle Bowman stated that further policy adjustments are likely needed to ensure inflation returns to target.
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Oil Rises, Bonds Fall as Fed Rate Hike Odds Near 70% for October Meeting
A surge in international oil prices and stronger-than-expected US PMI data triggered a sharp selloff in US Treasuries on Wednesday, sending yields to multi-year highs. The five-year yield broke above 5% for the first time since 2007, while the 10-year yield climbed above 5.1%, a 19-year peak. The selloff was initially driven by renewed supply concerns after an Iranian official stated that negotiations would not resume until Tehran's conditions are met, reversing earlier optimism from Saudi pipeline restorations. Brent crude rose over 5% to $103.7 per barrel, and WTI gained over 3% to $92.69. The US September composite PMI rose to 58.4, the highest since July 2021, with input costs rising at the fastest pace in four years, according to S&P Global economist Chris Williamson. Following the data, CME's FedWatch Tool showed the probability of a 25-basis-point rate hike at the October 27-28 FOMC meeting rising to 68.6%, up from 53% before the release. Fed Governor Michael Barr added hawkish commentary, stating that further policy adjustments are likely needed to ensure inflation returns to target.
Read sourceOil Surge, Bond Rout Fuel Rate-Hike Fears; Fed October Hike Odds Near 70%
A sharp rise in oil prices and stronger-than-expected US PMI data triggered a massive sell-off in US Treasuries on Wednesday, pushing the 5-year yield above 5% for the first time since 2007 and the 10-year yield above 5.1%, a 19-year high. Brent crude rebounded above $103 per barrel after Iranian officials stated they would not reopen the Strait of Hormuz or negotiate until their conditions are met, reversing earlier declines driven by Saudi pipeline restorations. The US Treasury's 5-year note auction saw weak demand, with a bid-to-cover ratio of 2.21, below the six-month average. The S&P Global US Composite PMI surged to 58.4 in September, the highest since July 2021, with input costs rising at the fastest pace in four years due to higher fuel and transport costs. Following the data, CME's FedWatch Tool showed the probability of a 25-basis-point rate hike at the Fed's October 27-28 meeting rising to 68.6%, up from 53% before the release. Fed Governor Michael Barr added to the hawkish sentiment, stating that further policy adjustments are likely needed to ensure inflation returns to target.
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