Treasury yields rise as 10-year hits January 2025 high mark

Treasury yields climbed Monday, with the 10-year yield at 4.776%, as investors tracked Middle East risks and Fed-rate repricing globally.

Ten-year reaches January high

The benchmark note was quoted at 4.776%, up 1.8 basis points from the prior level, after earlier touching its highest point since January 15, 2025. One basis point equals 0.01 percentage point; when yields rise, bond prices fall.

The 30-year bond reached 5.274%, up 2.5 basis points, leaving the long end with the larger move in the Treasury curve. The 2-year note was quoted at 4.356%, up 0.6 basis point in the same snapshot, keeping it close to Friday's level after a 12-basis-point rise.

Oil settles above $90

Crude prices rose after the latest escalation in the Middle East. Brent crude futures gained 2.71% from the prior settlement to $90.49 a barrel, while West Texas Intermediate added 2.83% to $85.76.

Trading followed an overnight escalation: U.S. strikes on Iranian targets, and a statement from Tehran that it had hit U.S. bases in Jordan in retaliation. At the same time, finance ministers, central bank governors and other officials from the Group of 20 gathered in Asheville, North Carolina.

Higher oil prices can complicate the inflation debate when central banks are weighing whether price pressures are easing quickly enough. For bond investors, the immediate question is whether energy costs feed into inflation expectations or remain a short-lived geopolitical premium.

Fed odds shift after Warsh

The short end of the Treasury market had already moved before Monday's session. On Friday, the 2-year yield rose more than 12 basis points to around 4.354% after Fed Chair Kevin Warsh used Jackson Hole remarks to stress inflation risks.

Fed funds futures traders now assign a 66% probability to a rate increase at the Federal Reserve's September Federal Open Market Committee meeting, according to CME's FedWatch tool. The 2-year note is watched closely in that setting because it tends to move with expectations for near-term policy rates.

Barclays strategists said their economists now expect two 25-basis-point increases this year, with one in September and another in December. "Kevin Warsh signaled a willingness to hike rates if inflation does not move toward target, and highlighted ‘concerning’ inflation trends over the past year," they said.

UBS Global Wealth Management offered a different base case. Mark Haefele, its chief investment officer, said his team still expects "steady progress in underlying inflation will allow the Fed to keep rates unchanged this year," even though the risk of a September move has increased.

Payrolls set next test

The next data points arrive quickly. Investors are due to parse the ISM Manufacturing PMI and JOLTS labor-market report on Tuesday, followed by nonfarm payrolls on Friday, for evidence on output, hiring and wage pressure.

If factory and labor-turnover data point to firmer demand, the mechanism would run through higher expected policy rates, pressure on the 10-year note and tighter financing costs for borrowers. If oil stays above $90 and Middle East risks persist, the global macro channel would be inflation expectations, with banks, brokers and asset managers facing more volatile client positioning.

If inflation data continue to cool, the UBS case would keep the Fed on hold, support demand for current yields and ease pressure on rate-sensitive sectors. The open questions are whether energy prices remain elevated through the September meeting and whether Friday's payrolls report confirms enough labor-market strength to validate the 66% hike probability.