10-year Treasury yields near 5.24% as oil prices stoke inflation fears

US Treasury yields have risen sharply, with the 10-year yield near 5.24% on Tuesday, driven by elevated oil prices fueling inflation fears and increased bets on a Federal Reserve rate hike. This marks the bond market's worst September performance since 2023. Higher oil prices are a key factor, as they raise concerns that inflation will stay persistent, prompting investors to demand higher returns on government bonds. Markets now price in about a 70% chance of a Fed rate increase at its October meeting, which further pressures yields upward. The 10-year yield is a benchmark for mortgage rates and other borrowing costs, and strategists warn that a move toward 5.5% could force investors and companies to reassess financial decisions. Additional pressure comes from the unwinding of the yen carry trade, which previously helped support demand for Treasurys.