US bond yields are at the highest level in the last 24 years: Selling pressure continues in the fourth quarter

Selling pressure in US Treasury bonds continued on the first trading day of October.

The yield on the 10-year US Treasury bond exceeded 5.31 percent, reaching the highest level in the last 24 years. The yield of the 30-year bond also rose above 5.65 percent, reaching the highest level since June 2002.

Since bond prices and yields move in opposite directions, the rise in yields indicates strong selling pressure in long-term US bonds.

The 10-year bond yield rose more than 87 basis points in the third quarter, the sharpest quarterly increase since 1994. According to Reuters data, US Treasury bonds thus experienced one of the worst quarterly performances of this century.

THE MARKET DOES NOT PRICE ONLY THE FED

The noteworthy aspect of the rise in bond yields is that the movement is not only due to expectations regarding the Fed's short-term interest rate decision.

The August personal consumption expenditures price index (PCE) in the USA, announced yesterday, increased by 0.3 percent on a monthly basis. The downward revision of July data weakened the expectations that the Fed would raise interest rates in October. Despite this, the fact that long-term bond yields continued to rise indicated that longer-term risks came to the fore in the market.

In the markets, the high borrowing needs of the US government, increasing bond supply and concerns about public finances put pressure on long-term yields.

Deteriorating public finances, high bond supply and rising inflation concerns are behind the sales wave in the global bond market in September.

ENERGY PRICES INCREASE THE RISK OF INFLATION

Another important pillar of sales in the bond market is energy prices.

The war in the Middle East and uncertainties regarding oil supply keep concerns about the impact of energy prices on global inflation alive. According to Reuters, the rise in bond yields is driven by concerns that rising energy costs could make inflation permanent.

Although the decline in oil prices today has alleviated some of the selling pressure in the bond market, yields are still close to the peaks of the last 24 years.

DOLLAR INDEX IS ALSO RISING

The rise in US bond yields also has a supportive effect on the dollar.

The dollar index reached 101.66, the highest level since June 25. The index increased by approximately 2 percent in September.

Euro/dollar parity fell below 1.13. The euro lost nearly 2.5 percent of its value against the dollar in September, recording one of its sharpest monthly declines since July 2025. Rising inflation in Europe, high energy costs and concerns about public finances put pressure on the euro.

Speaking to Reuters, National Australia Bank Head of Currency Strategy Ray Attrill said that at this stage the dollar appears to be more sensitive to movements in the 10-year US bond yield rather than the timing of the next Fed rate hike.

US ECONOMY REMAINS RESILIENT

Another factor supporting the rise in bond yields is expectations regarding the US economy.

Second quarter growth was revised to 2.2 percent from the previously announced 1.5 percent. Private sector employment also increased by 90 thousand people in September, exceeding the expectation of 70 thousand people.

These data indicate that the US economy remains resilient despite high interest rates, and support the expectation in the markets that interest rates may remain high for a longer time.

On the other hand, the rapid increase in artificial intelligence and data center investments supporting economic growth is among the factors affecting the long-term interest rate outlook. Reuters draws attention to the impact of energy costs, as well as artificial intelligence and data center investments, on growth expectations in the rise in bond yields.

SALE IN THE GLOBAL BOND MARKET

The movement in the US is not independent of the global bond market.

In September, global bonds saw a sharp sell-off due to high inflation, rising energy costs, high public debt and an increase in bond supply. Following the USA, long-term bond yields also increased in Japan and Europe.

Since the US 10-year bond is one of the main debt indicators in global financial markets, the rise here causes financial conditions to tighten in many markets, from stocks to developing country assets.

EYES ON EMPLOYMENT DATA

The next focus of the markets is the US employment data for September.

The outlook of the employment market will be decisive in expectations regarding the Fed's interest rate policy. While the PCE data is more moderate than expected, reducing the expectations for an interest rate increase in October, the rise in long-term bond yields shows that investors' concerns about inflation, energy prices and the US borrowing outlook continue.

Thus, a picture emerges in the US bond market where long-term borrowing costs increase regardless of the Fed's short-term interest rate decision. The fact that 10- and 30-year bond yields reached post-2002 peaks, along with the strengthening of the dollar, indicates that global markets entered the fourth quarter with a higher interest rate environment.