The US 10 year Treasury note yield climbed to 5.05 percent on Wednesday, September 23, reaching its highest level since July 2007. The benchmark yield has risen 113 basis points from its March low, reflecting growing expectations that the Federal Reserve may need to maintain or resume monetary tightening amid resilient economic activity and persistent price pressures. The two year Treasury yield also reached a 27 month high.

The latest move in bond yields followed stronger than expected September flash Purchasing Managers Index data. The S&P Global US Composite PMI rose to 58.4 from 56.0 in August, marking the strongest expansion in private sector activity since July 2021. Both manufacturing and services activity strengthened, while new orders accelerated and signs of higher input costs added to concerns about inflation.

The stronger economic data has increased expectations for further Federal Reserve rate increases. Reuters reported that futures markets were pricing a higher probability of another rate hike in October following the PMI release, while the rise in Treasury yields reflected concerns that inflation could remain elevated despite tighter monetary policy.

Higher Treasury yields put pressure on US equities on Wednesday, with investors reassessing the outlook for interest rates and the valuation of risk assets. The decline followed a record high for the Nasdaq Composite on Tuesday, when technology stocks had benefited from renewed enthusiasm around artificial intelligence.

Oil prices also moved higher as investors monitored diplomatic efforts to end the Middle East conflict. US President Donald Trump said that US and Iranian representatives had held productive discussions at the United Nations and that another meeting was scheduled. Earlier optimism over a possible agreement had pushed oil prices lower on expectations that energy supplies could move more freely through the Strait of Hormuz.

With further progress on negotiations yet to emerge, Brent crude recovered almost 2 percent on Wednesday and moved back above $100 a barrel. The combination of elevated oil prices, higher Treasury yields and renewed rate hike expectations added to uncertainty across global financial markets.

European and Asian equities also came under pressure, reflecting the broader impact of higher US bond yields and uncertainty surrounding energy prices. The latest market moves highlight the interaction between stronger US economic activity, inflation expectations, monetary policy and geopolitical developments in shaping global asset prices.