10-year Treasury yield jumps back above 5% as oil gains and more Fed rate

U.S. Treasury yields jumped on Thursday, sending the 10-year note above 5% alongside a move higher in oil prices and expectations of further Federal Reserve hikes.

The yield on the 10-year U.S. Treasury note — the benchmark for mortgages, auto loans and credit card debt — rose 3.1 basis points to 5.02% after earlier hitting 5.0583%, the highest since Oct. 22.

The 2-year Treasury note yield, more sensitive to short-term Fed interest rate decisions, jumped 7 basis points to 4.797%. The longer-dated 30-year Treasury bond yield 1.4 basis points to 5.363%.

One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.

The rise in oil prices came after President Donald Trump said, “we don’t need a deal with Iran,” raising concern that the war in the Middle East will continue indefinitely. West Texas Intermediate futures gained 0.4% to $86.86 a barrel, while Brent crude was ahead about 1% to $93.60 per barrel.

Tuesday’s hotter-than-expected consumer price index reading has investors anticipating more rate increases from the Fed. Goldman Sachs forecast another rate hike to its forecast on Wednesday, now expecting an additional quarter percentage point increase in March. Traders are pricing in 100% odds of an increase in December, with the chance of a half percentage point increase standing at about 13%, according to the CME Group’s FedWatch tool.

Another inflation report is due Friday, when the October producer price index, which tracks wholesale prices, is expected to show a 0.4% rise in October, down from the 1.3% surge in September.

On Thursday, investors are looking for October’s home sales report from the National Association of Realtors. Existing home sales rose 1.5% in September to 3.99 million, up from a two-year low in August, and are expected to have reached 4 million last month, according to Trading Economics estimates.