US 10-Year Treasury Yield Surges to 5.02%, Highest Since 2007

The US 10-year Treasury yield surged to a 19-year high of 5.02%, surpassing its 2023 peak and reaching the highest level since 2007, according to Bloomberg as of Thursday (local time). The yield rose up to 4 basis points during trading.

Recent concerns over Middle East oil supply disruptions have driven international oil prices higher, intensifying selling pressure in bond markets. Since the US attack on Iran at the end of February, Middle Eastern oil and natural gas supplies have become unstable, putting sustained upward pressure on global Treasury yields.

Markets are closely watching Friday's Federal Reserve interest rate decision. Investors expect the Fed to raise rates for the first time since July 2023. If the Fed holds rates steady or Chair Kevin Warsh presents a more dovish future rate path than expected, long-term bond yields could face further upward pressure.

BMO Capital Markets strategist Bail Hartman warned that it would be very difficult for the Fed to freeze rates without damaging confidence in its inflation response. He also noted that an unexpected hold combined with a slower pace of tightening ('dovish hike') could weigh on the bond market.

Increased Treasury supply is also contributing to rising yields. Governments are expanding issuance to refinance maturing bonds and cover fiscal deficits, while corporate borrowing for AI investment expansion has further increased bond market supply pressure.

UBS US interest rate strategist Phoebe White stated that with no clear signs of weakness in the real economy and significant structural changes in Treasury market supply-demand dynamics compared to 2007, there is limited room for long-term yields to decline. She also noted that structural demand from foreign public sectors for US Treasuries has significantly weakened.