10-year Treasury yield jumps to highest level in over a year as oil surge rattles bond market
The US Treasury Department building is seen in Washington
New York (CNN) — Rising oil prices and persistent inflation nerves are rippling through bond markets and pushing up borrowing costs for US consumers.
The 10-year US Treasury yield on Thursday rose four basis points, to 4.71%, its highest level since January 2025. The yield rose just above its previous Iran war peak in May of 4.66%. Prior to the war with Iran, which started in February, the 10-year yield was below 4%.
Renewed tensions between Washington and Tehran and climbing oil prices, with Brent crude hitting $100 per barrel Thursday morning, are reigniting jitters in the bond market. Investors are demanding a higher yield on Treasuries to compensate for the risk of inflation eating into their return. Yields rise when bond prices fall.
The war with Iran and surge in oil prices has shifted the outlook for central banks across the globe. Traders expect the Federal Reserve to keep rates on hold, or even hike them, in the coming months. The prospect of higher borrowing costs is keeping bond yields elevated. And the bond market is also adjusting to the start of Kevin Warsh’s term as Fed chairman.
“That’s probably the biggest driver as of right now, the Kevin Warsh story and how he approaches his position as Fed chair,” Tom Tzitzouris, head of fixed income research at Baird Strategas, told CNN.
US stocks opened lower Thursday as rising bond yields and a slide in shares of tech companies weighed on markets. The Dow fell 370 points, or 0.7%. The S&P 500 fell 0.8%, and the Nasdaq Composite sank 1.6%. Google parent company Alphabet (GOOG) dropped more than 6% after reported earnings Wednesday as investors weighed concerns about increased spending forecasts for the artificial intelligence buildout.
The 10-year yield helps determine borrowing costs across the economy, including the 30-year mortgage rate. Mortgage rates last week hit the highest level since the start of the war with Iran.
There are also growing nerves about government deficits across the globe. The war with Iran so far has cost the United States $37.5 billion, Defense Secretary Pete Hegseth said on Tuesday.
Higher deficits mean governments could have to issue more bonds to pay for their spending. An increase in supply of bonds coupled with nerves about shakier government finances could prompt traders to demand higher yields. The 30-year yield in May hit its highest level since 2007.
The bond market moves come days after JPMorgan Chase CEO Jamie Dimon said in an interview that he wouldn’t purchase long-dated US Treasuries, like 10-year bonds, at current prices.
Dimon, speaking on The Master Investor Podcast with Wilfred Frost, said he doesn’t see the appeal of Treasuries amid lingering concerns about inflation and government deficits.
Dimon said deficit issues facing major economies, including the United States, “will become a problem.”
“That will exhibit itself with higher interest rates, the market getting rattled a little bit, people talking about constantly remember the bond market, the bond market vigilantes,” Dimon said. “Hopefully not worse than that, but it could be worse than that.”
This is a developing story and will be updated.
The-CNN-Wire
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