Borrowing Costs
The 10-year Treasury yield hits its highest level since 2007 as oil prices surge over Middle East tensions.
Traders bid US borrowing costs to their highest level since 2007 this week, as oil prices spiked over Middle East tensions and pulled Treasury yields with them.
Tuesday, the 10-year Treasury yield hit 5.04% before easing back, BBC News reported. The 30-year yield climbed to 5.33%, its highest since June 2007, according to BBC News and ABC News.
A rising rate signals growing doubt about a government's finances. It can also reflect investor confidence, per BBC News.
Oil is the trigger. The global benchmark crude price topped $109 a barrel Tuesday, up from about $86 at the end of August, BBC News reported. Fresh doubt about Saudi Arabia's ability to export oil drove the jump as regional tensions rose. Gas prices averaged $4.08 a gallon nationwide, ABC News reported, up from $2.98 before fighting between the US, Israel and Iran began. Traffic through the Strait of Hormuz has fallen to about 13 ships a day. More than 100 passed through daily before the conflict, oil-data firm Kpler told ABC News.
Investors expect Federal Reserve Chair Kevin Warsh to raise interest rates to fight inflation from costlier oil, BBC News reported. Trump opposes a hike. Lower rates help the economy, he's long argued, and he previously clashed with Warsh's predecessor, Jerome Powell, over the same issue.
Heavy borrowing by AI companies building data centers is also pushing yields higher, BBC News reported. Germany and Japan posted similar increases in long-term borrowing costs this week.
Carol Schleif, chief market strategist at BMO Wealth Management, told BBC News the rise has been orderly this year. It could stay high, she warned, if geopolitical tensions and steep energy prices stay, as she put it, "front and center."
Yields eased Wednesday. Treasury officials said they would at least double the buyback of long-term debt, ABC News reported, and the 30-year yield fell to 5.20% that morning. The Dow Jones Industrial Average gained 245 points. The S&P 500 rose 0.3%. The Nasdaq slipped 0.1%, according to ABC News.
Prices rose 3.4% in July compared with a year earlier, more than a point above the Federal Reserve's 2% target, ABC News reported.