Yields elevated as inflation fears keep markets on edge

US Treasury yields climbed higher as market jitters persisted over rising inflation and the potential for additional interest rate increases. The benchmark 10-year yield hit a 20-year high, while longer-dated yields retreated from earlier peaks. Oil prices surged nearly 2% amid limited progress in US-Iran talks and concerns over a potential US ban on diesel exports.

Previous bond market weakness left investors cautious, pushing yields to their steepest daily rise since April 2025. Strong US business activity data, with prices paid hitting a nearly four-year peak, contributed to the yield surge. Traders worry that higher yields could undermine the stock market rally by raising borrowing costs and prompting investors to move into bonds.

However, financial conditions remain supportive of a robust economy and stock market, according to Macro Hive's Antonio Del Favero. The MSCI World Index lost half its value when 10-year yields breached 5%, a scenario that could signal a risky environment. Fed funds traders now see a 66% chance of a rate hike next month, up from around 53% before Wednesday's S&P data.