U.S. government bonds recovered some ground after New York Federal Reserve President John Williams signaled that further interest rate increases were not urgent. The respite followed a sell-off on the 29th that pushed the 30-year Treasury yield above 5.6%, as investors weighed inflation pressures and mounting federal borrowing.
Longer-dated debt remained under pressure from concerns about U.S. fiscal sustainability. National debt passed $40 trillion last month, and the rapid expansion in government borrowing has prompted investors to seek greater compensation for holding Treasurys with distant maturities. Those demands have contributed to the increase in long-term yields.
Energy costs have added to the pressure on the bond market. The Israel-Iran war has lifted oil prices, feeding inflation at a time when U.S. economic releases continue to show strength. Together, persistent energy inflation and resilient activity have reinforced expectations that the Federal Reserve could raise interest rates further.
The session’s sharpest milestone came in the 30-year maturity, where the yield touched 5.613%, a level last seen in June 2002. It subsequently stood near 5.556%, below its intraday peak but following a climb to its highest point in roughly 24 years.
Selling also affected the 10-year Treasury, a benchmark for global financial markets. Its yield reached a 19-year high during the session and was quoted at 5.264%, an increase of 2.2 basis points over the preceding session, as the 30-year yield set its record.
Williams’ comments tempered the market’s immediate expectations for monetary tightening. Treasury selling moderated after he indicated there was no need to move quickly on additional increases, while investors reduced their expectations for a rate rise at the Fed’s October meeting.
