The 30-year Treasury Yield Has Reached a 16-year High of Almost 4.9%

On Tuesday, the 30-year Treasury yield surged above 4.85%, approaching its highest level in 16 years. This upward momentum in long-term yields was driven by traders' ongoing efforts to push rates toward 5% in line with the expectation of prolonged higher interest rates.

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Here's a summary of the yield movements:

• The 2-year Treasury yield increased by 2.8 basis points, reaching 5.138% from the previous day's 5.110%. (Note: Yields move inversely to bond prices.)
• The 10-year Treasury yield advanced by 6.5 basis points, reaching 4.747% from Monday afternoon's 4.682%. This 10-year rate is heading toward its highest level since August 13, 2007, according to Tradeweb data.
• The 30-year Treasury yield climbed by 7.4 basis points, reaching 4.868% from the late Monday rate of 4.794%. The 30-year rate is approaching its highest closing level since October 16, 2007.

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Investors continued to sell government bonds across the spectrum, amplifying losses for existing Treasury holders. This trend was influenced by the expectation that the Federal Reserve would maintain higher interest rates for an extended period.

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Several factors contributed to the Treasury selloff on Monday, including the government's avoidance of a weekend shutdown and a more hawkish tone from Fed officials. Additionally, there was a slightly improved Institute for Supply Management manufacturing survey for September.

On Tuesday, U.S. job openings for August rose to 9.6 million, a sharp increase following a dip to a more than two-year low in the previous month. This data suggests that the labor market remains robust.

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More employment-related data is expected this week, including the September ADP private sector employment report on Wednesday and weekly initial jobless claims on Thursday. The highly anticipated nonfarm payrolls report for September will be released on Friday, shaping expectations regarding interest rates.

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As of now, the market is pricing in a 73.8% probability that the Fed will leave interest rates unchanged within a range of 5.25%-5.5% on November 1, according to the CME FedWatch Tool. There is a 37.3% likelihood of a 25-basis-point rate hike to a range of 5.5%-5.75% at the subsequent meeting in December. The central bank is generally expected to maintain the fed funds rate target above 5% through the latter half of the next year.

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In remarks made on Tuesday, Raphael Bostic, President of the Atlanta Fed, stated that further interest rate increases might not be necessary to bring inflation back down to pre-pandemic levels.

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