Treasury Yields Hit Fresh Highs as Oil-Driven Inflation Keeps the Fed on a Hawkish Path

What moved

The US 10-year Treasury yield pushed to around 5.30% overnight — among its highest levels in roughly a year — with the 30-year yield above 5.63%, extending September’s steep bond sell-off. US equities finished Wednesday mixed to lower into quarter-end: the S&P 500 slipped 0.04%, the Dow Jones fell 0.70% and the Nasdaq eased 0.37%, even after the third quarter delivered record highs for major benchmarks earlier on.

Gold, a commodity highly sensitive to real yields, fell to around $4,150 an ounce in early Thursday trading, pressured by firmer oil prices even as US Personal Consumption Expenditures data came in a touch softer than expected. WTI crude eased back toward $89 a barrel after Wednesday’s sharp decline, as Gulf shipping routes showed signs of normalizing: Saudi Arabia restored roughly half of its East-West pipeline capacity, and flows through the Strait of Hormuz climbed to around 13.2 million barrels a day.

In currencies, the Dollar firmed broadly against the Euro. EUR/USD slipped toward 1.1325, while USD/JPY held just below 157.00 as traders weighed Dollar strength against mounting speculation that Japan’s central bank could raise rates as soon as October or December.

Why it happened

The common thread is inflation that refuses to cool in a straight line. Headline Personal Consumption Expenditures inflation eased to 3.4% year-on-year, with the core measure at 3.0% — both a touch softer than economists had expected. Treasury yields barely reacted, because this week’s bigger story is energy: elevated oil prices tied to the unresolved US-Iran standoff over the Strait of Hormuz are reviving concern that price pressures could prove stickier through the autumn.

That concern was reinforced by Federal Reserve policymaker Neel Kashkari, who struck a notably hawkish tone, flagging the possibility of one more rate hike this year and another in 2027. His comments followed the Federal Reserve’s September 16 decision to raise its benchmark interest rate to a 3.75%–4.00% range — the first increase of the current cycle, and a direct response to the same energy-driven inflation now back in focus. Markets are pricing meaningful odds of a further move at the FOMC’s next policy meeting, and Kashkari’s remarks kept those odds elevated even as the softer PCE print argued the other way.

Private-sector hiring added to the cross-currents: Wednesday’s ADP employment report showed private payrolls rising by roughly 90,000 in September, comfortably ahead of the 68,000 expected — a reminder that the labor market isn’t cooling in a straight line either. In the Eurozone, European Central Bank President Christine Lagarde struck a more balanced, gradual note on the policy outlook, favoring patience over aggressive tightening — a contrast with the Federal Reserve’s posture that has helped the Dollar hold its advantage over the Euro.

What to watch today

All times below are Saudi Arabia (KSA) time.

• 10:00Eurozone Final Manufacturing PMI (September) is due this morning and will show whether the bloc's factory sector lost further ground after a soft summer.
• 15:30US Initial Jobless Claims (weekly) lands this afternoon — the first fresh read on the labor market since Wednesday's strong ADP report.
• 17:00US ISM Manufacturing PMI (September) follows shortly after, with its prices-paid component a key input for near-term inflation expectations.
• 15:30US Non-Farm Payrolls (NFP) for September — the week's headline release — follows on Friday.
• 16:00OPEC+ holds its delegate-level meeting on November output quotas this Sunday, with producers widely expected to keep targets unchanged.

See the full Economic Calendar for every upcoming release and its exact time.