Bond yields surge to fresh two-decade highs but oil prices buffeted by Iran headlines - NBC News

Key U.S. Treasury yields surged to fresh two-decade highs Thursday as the price of oil jumped to as high as $108 per barrel.

The yield on the 30-year U.S. Treasury bond soared as high as 5.47%, a level not seen in 22 years.

After having posted its biggest one-day rise since April 2025, the yield on the 10-year U.S. Treasury bond continued advancing Thursday. In early trading, it climbed as high as 5.18%. That remains its highest since 2007.

Because of the influence the 10-year yield has over consumer borrowing rates, the average 30-year fixed mortgage rate jumped to 7.37% on Thursday, its highest since May 2024.

Meanwhile, oil prices jumped again overnight after a mediated U.S. dialogue with Iran at the United Nations General Assembly produced no tangible evidence of any progress toward ending the seven-month war.

Much of the day’s gains in oil were reversed shortly after midday ET after Reuters reported that U.S. and Iranian negotiators are exploring a phased path out of the war. The path reportedly involves Tehran’s reopening the Strait of Hormuz, according to Reuters’ multiple unnamed sources.

NBC News has not confirmed the Reuters report.

The reversal was short-lived, however, and international Brent crude oil continued to rise and closed higher by 3.4%, at $106.60. U.S. crude oil ended the day higher by 2.6%, at $94.61 per barrel.

Since the start of the year, both Brent and West Texas Intermediary crude are up more than 65%.

The rising oil prices have continued to push commercial diesel fuel prices to records. On Thursday, the national average price for diesel was $6.51, effectively unchanged from a day earlier but up 73% since the Iran war began.

Likewise, the national average price of regular unleaded gas was 50% higher Thursday than it was when the U.S. and Israel attacked Iran in late February, at $4.48 per gallon.

Stocks fell in early trading, but like oil, they sharply reversed course on the Reuters report. The S&P 500 erased a drop of 0.5%, while the Nasdaq Composite erased a 0.9% slip. Both indexes closed flat.

Around the world, the bond sell-off is roiling sovereign debt markets.

“The acceleration higher in US rates yesterday is being felt globally as to highlight for the umpteenth time that we’re all in this global bond boat together,” wrote Peter Boockvar, chief investment officer at OnePoint BFG Wealth.

The yield on Japan’s 10-year bond rose to its highest level since 1996 on Thursday, while Germany’s 10-year bund notched its highest yield since 2009.

“As summer officially ends, macro data are still fairly solid in the US, as indicated by a 4%-type unemployment rate and 2%-ish growth,” wrote Bank of America’s global rates analysts.

“But the risks continue to pile up for anxious markets,” they added, pointing to ongoing trade wars, the energy supply shock, upcoming midterm elections and potential risks to the AI boom.

A major driver of the surge in bond yields this week was a report from S&P Global, released Wednesday morning, that found that while U.S. business activity accelerated in September, “firms’ input costs have meanwhile jumped in September at the steepest rate for four years, with fuel and transport costs spiking higher.”

That led investors and traders to ramp up their bets on Fed rate hikes.

Federal Reserve Bank of New York President John Williams said the central bank still has more work to do to help bring down inflation.

It’s “likely that another rate hike may be appropriate by the end of the year,” Williams said Thursday in a speech in London.

Nonetheless, he said, the U.S. economy has demonstrated “remarkable resilience” in the face of “significant shocks” hitting it.

Another key official, Anna Paulson, president of the Philadelphia Fed, said Thursday that she, too, expects “some modest further tightening may be warranted.”

In central banker parlance, tightening refers to raising rates.

The rise in bond yields has continued despite a series of measures taken — and warnings delivered — by Treasury Secretary Scott Bessent this month.

“ I am the house now,” Bessent said Sept. 8, “and you can bet against me if you want.”

At the time, Bessent was defending a Treasury Department intervention to help prop up the Japanese yen. The hope was that a stronger yen would relieve pressure on the Japanese government to sell U.S. Treasury bonds.