U.S. Treasury Yields Edge Higher on Friday as Markets Await PMI Data and Fed Decision
nashnova research
The 10-year Treasury yield rose 2 basis points Friday to 4.9779%, inching back toward 5% after posting its largest single-day drop since March 2023. With oil above $100 and the Fed meeting next week, the market is caught between safe-haven demand and inflation anxiety.
Thursday's plunge, Friday's bounce — what is the bond market trading?
Thursday's 10-year yield plunged 17 basis points to 4.972%, breaking below 5% for the first time in a month. The triggers: a sudden flare-up of concern over AI-related debt issuance, plus safe-haven buying on renewed Middle East tensions.
On Friday morning, both the 10-year and 2-year yields rose 2 basis points; the 30-year edged up over 1 basis point to 5.3007%.
This means → Thursday's drop was a panic-driven flight to safety, not a trend reversal. Friday's modest rebound shows the market digesting that move and shifting back to wait-and-see.
Oil above $100 — what does that mean for bonds?
WTI crude rose 1.16% Friday to $100.61 a barrel; Brent gained 0.79% to $114.06.
The immediate catalyst: Houthi forces — an Iran-backed armed group in Yemen — launched fresh strikes on Saudi facilities, stoking fears of further supply disruption. Reports that the U.S. and Israel may resume strikes on Iran after the midterms added to the geopolitical risk premium.
In plain terms = high oil prices are fuel for inflation — as long as oil stays elevated, the Fed's room to ease stays narrow, and bond yields struggle to come down.
Why do rate expectations keep swinging back and forth?
Earlier this week, investors piled into Treasuries for safety. Fed-funds futures fully priced out one rate hike next year, and even a December hike was no longer fully discounted.
Once oil reclaimed $100, that easing narrative came under pressure — persistent inflation leaves no door open for cuts.
This reflects a market toggling between two stories: geopolitical risk → buy Treasuries → yields fall vs. oil drives inflation higher → the Fed can't let go → yields rise.
What to watch next week?
Friday's PMI: the S&P Global flash manufacturing and services PMI — a survey-based gauge of business confidence in orders and output — is the last major economic signal before the Fed meeting.
Next week's Fed rate decision: with oil elevated, geopolitical risks unresolved, and AI capital-spending prospects in question, inflation is expected to dominate the agenda.
This means → a strong PMI would push rate-cut expectations further out; a weak one would hand the advantage back to the safe-haven narrative. Either outcome feeds directly into bond-market volatility.
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