The 10-year Treasury yield rose to 5.22% on Monday as oil jumped and traders priced a 68% chance that Chair Kevin Warsh's Federal Reserve hikes again in October. Reuters reported two-year yields up 5 basis points on the day at 4.914%, and up 56 basis points in September, the largest monthly rise since February 2023. The 30-year edged up to 5.52%, after hitting the highest level since 2004 last week. The gap between 2-year and 10-year yields narrowed to about 30 basis points from about 40 basis points a month ago. Markets imply about 90 basis points of further tightening out to late next year. The funds rate is already 3.75% to 4.00% after the unanimous 25 basis point hike on 16 September. The median dot from that meeting still pointed to 4.1% by year end. A 68% October probability, and desks nearer 70% by Tuesday morning, is the market moving ahead of that dot. A week ago the 10-year was still near 4.93%. See that 23 September print.
Oil did the work the data calendar has not finished
The trigger was crude and diplomacy, not a fresh inflation print. Brent rose 4% to $108.50 on Monday after President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz and said talks would continue. By Tuesday morning Brent was nearer $107 and spot gold had steadied near $4,119 after sliding 3% to $4,151 on Monday, down nearly 7% in September. The dollar index reached a two-month high at 101.39. The euro was at $1.1383. S&P 500 futures fell 0.5% and Nasdaq futures fell 1%. Mark McCormick, chief FX strategist at BMO, said the bond market was pricing U.S. resilience and a higher equilibrium rate, not a crisis. Steven Major, global macro advisor at Tradition, said the rise in nominal yields was mostly higher real yields and shifting policy expectations, not a runaway inflation premium. Bitcoin still drew an eighth straight day of spot ETF inflows, $31.07 million on Monday, while trading near $83,000. Coupon-free assets are losing the comparison with a 5.22% 10-year. This week's inflation, GDP, and jobs readings are the next test. If those prints keep October odds near 70%, gold's slide and bitcoin's stall can extend together. See Monday's oil and gold tape and the ETF print that did not stop the dip.