U.S. Treasury yields remained close to multi-week highs on Monday as investors reacted to Federal Reserve Chair Kevin Warsh’s hawkish Jackson Hole speech and a sharp rise in crude oil prices.
Long-term borrowing costs continued to move higher as bond markets reassessed the outlook for U.S. interest rates and inflation.
10-Year and 30-Year Treasury Yields Move Higher
The benchmark 10-year Treasury yield edged up to 4.720%, marking its third consecutive session of gains.
At the longer end of the curve, the 30-year Treasury yield climbed to 5.222%, reaching its highest level in nearly a week.
Meanwhile, the policy-sensitive two-year Treasury yield eased slightly to 4.323%.
The modest decline followed a sharp jump on Friday, when the two-year yield recorded its biggest one-day increase since June 17, 2026.
Warsh’s Hawkish Speech Raises September Rate Hike Odds
The main driver behind the bond market sell-off was Kevin Warsh’s speech at the Jackson Hole symposium.
Warsh warned that the Federal Reserve still has more work to do if inflation does not show convincing progress toward the central bank’s 2% target.
His comments led traders to increase expectations for another interest rate hike.
Fed funds futures now point to roughly a 60% probability of a 25-basis-point rate increase at the Fed’s Sept. 16 meeting.
Before Warsh’s speech, markets had priced in only around a 35% chance of a hike.
European Bond Yields Also Climb
The shift in U.S. rate expectations also affected European bond markets.
Germany’s two-year Schatz yield rose to 2.898%, reaching a multi-month high.
The 10-year German Bund yield climbed to 3.2903%, its highest level since 2011.
Meanwhile, France’s 30-year government bond yield reached its highest level since 2008.
Investors are now watching upcoming speeches from Fed Governors Michael Barr and Christopher Waller for further clues about whether Warsh’s hawkish message is shared across the Federal Reserve.
Oil Prices Surge on Middle East Escalation
A sharp rise in crude oil prices added further pressure to global bond markets.
Renewed military tensions in the Persian Gulf pushed energy prices higher and raised concerns that inflation could remain elevated for longer.
U.S. forces carried out strikes against two Iranian rocket launchers on Larak Island in the Strait of Hormuz over the weekend.
Iran later responded with attacks targeting U.S. military positions in Jordan.
The escalation pushed Brent crude futures nearly 3% higher, above $90.50 per barrel.
Higher Oil Prices Add to Inflation Risks
The jump in oil prices has renewed concerns about cost-driven inflation.
The Strait of Hormuz remains one of the world’s most important energy shipping routes, meaning prolonged disruptions could have a significant impact on global oil supplies and prices.
The latest commodity shock comes at a sensitive time for central banks, which are already trying to balance inflation risks with economic growth.
European investors are also preparing for upcoming eurozone inflation data, which could strengthen expectations for another European Central Bank rate hike in September.
U.S. Labor Data Comes Into Focus
With Treasury yields remaining elevated, investors are now turning their attention to a busy week of U.S. economic data.
July JOLTS job openings figures are due on Tuesday and will provide fresh information about labor demand.
August ADP private payroll data will follow on Wednesday.
The week will conclude with Friday’s nonfarm payrolls report, one of the most closely watched indicators ahead of the September Federal Reserve meeting.
Economists expect hiring to recover after weakness in July.
A stronger-than-expected labor market report could reinforce expectations for another Fed rate hike, while softer data could reduce pressure on policymakers to tighten monetary policy further.
