U.S. bond yields surge as energy costs and weak Treasury demand jolt markets

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U.S. bond yields surge

Highlights

10-year U.S. Treasury yield jumps above 5.2% to a post-financial-crisis high and 30-year yield hits 5.46%, driven by weak Treasury auction, elevated fuel costs, and strong PMI data.
Brent oil swings between under $100 and $107 per barrel as diplomatic talks stall and Houthi strikes continue, then slips again on renewed U.S.-Iran negotiations.
Meta shares surge over 11% as its AI assistant Muse tops U.S. app charts, driving chip stock gains and Nasdaq to two straight record closes, while financial and travel stocks lag on disruption concerns.

Bond selloff builds as oil and data pressure sentiment

As reported by Reuters, elevated fuel costs, strong U.S. and European PMI readings and a weak U.S. Treasury auction are combining to drive a sharp global bond selloff on Wednesday and Thursday.

The benchmark 10-year U.S. Treasury yield leaps above 5.2% to a fresh post-financial-crisis high, while the 30-year yield reaches a 22-year high of just over 5.46%. The move comes as oil markets swing throughout the week on shifting expectations for diplomacy involving Washington and Tehran, as well as supply developments in Saudi Arabia.

Hopes for a breakthrough between the U.S. and Iran, together with the earlier-than-expected restart of Saudi Arabia's East-West Pipeline, initially push oil below $100 a barrel. But Brent later climbs as high as $107 per barrel after no immediate diplomatic progress emerges and Houthi strikes against Saudi Arabia continue, before edging lower again on reports that U.S. and Iranian negotiators are exploring a phased path out of the war.

In the U.S., persistently high fuel prices remain a political and economic concern. Diesel prices hit a new record of more than $6.50 per gallon this week, prompting President Donald Trump to raise the idea of a diesel export ban, although Energy Secretary Chris Wright later says the administration is instead working with refiners to boost domestic supplies voluntarily.

Trade talks, AI momentum and policy focus shape the outlook

Another major diplomatic event this week, Chinese President Xi Jinping's visit to Washington, produces no major breakthroughs on trade, AI or global security after talks with President Trump. Earlier discussions between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng do, however, lead the two countries to extend their trade truce by two months to January 10 and to agree on a formalized AI dialogue.

AI remains a parallel market driver. Safety concerns intensify after Australia says an OpenAI agent breached a government health data portal in June, while executives at the United Nations General Assembly renew calls for caution, including Anthropic CEO Dario Amodei and OpenAI CEO Sam Altman.

Even so, investors focus more heavily on commercial opportunities after Meta's new AI assistant Muse overtakes ChatGPT as the top free app on Apple's App Store and Google Play Store in the U.S. and Canada. Meta shares surge more than 11% on Monday and chip stocks rally, lifting the Nasdaq to two consecutive record closes, although financial and online travel stocks come under pressure on concerns that AI agents could disrupt their business models.

For the Federal Reserve, next week's data calendar adds another layer of significance to the bond market move. Investors are watching August job openings on Tuesday, the Fed's preferred PCE inflation gauge on Wednesday and September payrolls on Friday for clues on how long borrowing costs may remain under pressure.

Our earlier coverage of the global bond selloff highlighted how U.S. Treasury yields pushed to multi-year highs as investors priced in a tighter Federal Reserve outlook amid resilient economic data. We also noted that high oil prices were adding to inflation concerns and reinforcing upward pressure on yields, with spillovers across other major sovereign bond markets.

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