Rates on the long end kept pressing higher Tuesday as investors stayed focused on inflation, wide U.S. fiscal deficits, and a hefty pace of Treasury supply. The 30-year yield was up by a bit more than 2 basis points to around 5.585% and earlier nudged just above 5.6%. That intraday push was the highest since June 2002, when the same maturity hit 5.644%. The 10-year benchmark - a reference point for mortgages, auto loans, and credit cards - was up about 1 basis point to 5.253%.
Geopolitics hovered in the backdrop. Al Jazeera reported the U.S. and Iran held separate, mediator-led talks aimed at resolving the ongoing Middle East conflict. The seven-month war has been weighing on energy prices and feeding expectations that the Federal Reserve could deliver further rate hikes to address fast-rising prices, a backdrop intensified by growing government debt.
Shorter maturities eased. The 2-year yield - often a proxy for near-term Fed policy - slipped by just over 3 basis points, landing at 4.891%. Market snapshots also showed the 10-year at 5.234% and the 2-year at 4.879% later in the session.
Additional reads: 1 Month at 3.94%, 3 Month at 4.169%, 6 Month at 4.369%, 1 Year at 4.472%, and 30 Year at 5.566%. A single basis point is 0.01%, and bond prices and yields typically move in opposite directions.
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CNBC interviewed JoAnne Bianco of BondBloxx Investment Management, where she is senior investment strategist. She said, "Investors remain very focused on inflation and they're more worried about the fiscal deficits here in the U.S... [as well as] the amount of Treasury supply," adding, "All of those things make them think there needs to be more term premium."
Derivatives linked to the Fed's upcoming decision indicate a probability of more than 72% for another hike at the October meeting, the CME FedWatch tool shows. Earlier this month, the Federal Open Market Committee unanimously (12-0) approved a 25-basis-point increase to the central bank's key policy rate.
Higher long-term yields tend to push up borrowing costs across everyday credit, from mortgages to credit cards. If energy stays firm and inflation pressures persist, expect a bumpy rate backdrop, with bond prices and yields continuing their seesaw relationship.
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