06.10.202611:21:14UTC+0010-Year Treasury Yield Softens from 24-Year High

The yield on the 10-year US Treasury note stood at 5.27% on Tuesday, pausing after a surge that pushed it to a 24-year high of 5.33% on Monday, in line with a brief pullback in wholesale fuel prices. Crude oil prices eased as reports indicated that some laden tankers were able to transit the Strait of Hormuz.

So far this year, the 10-year yield has climbed more than 110 basis points, as expectations of prolonged higher interest rates from the Federal Reserve, a sharply widening federal deficit, and heavier corporate bond issuance have all undermined demand for longer-duration debt.

On the macroeconomic front, the prices-paid component of the ISM Services PMI jumped to a four-year high, reinforcing market expectations that the Fed will deliver at least one more rate increase this year.

At the same time, the growing budget shortfall is expected to boost the supply of Treasury securities, even though the Treasury has signaled a preference for funding more of its borrowing through shorter-term, coupon-free bills. According to the latest projections from the Congressional Budget Office, net public debt is projected to rise from 101% of GDP this year to more than 175% by 2056, based on an assumed 10-year yield of under 4.5%.