10-Year Treasury Yield Posts Biggest Quarterly Jump Since 1994; TLT Hits Record Low

The 10-year U.S. Treasury yield climbed to 5.29% on Wednesday, capping a quarterly rise of 87 basis points — the largest since the first quarter of 1994 — as long-dated bond selling persisted despite softer August inflation data. The iShares 20+ Year Treasury Bond ETF (TLT) fell 10% in the third quarter, its worst showing since late 2024, closing Wednesday at $77.78, a record low. The 30-year yield rose nearly 4 basis points intraday to 5.632%, near 2002 highs, while the 2-year held at 4.895%. August PCE rose 0.3% monthly and 3.4% annually, below the 3.7% estimate; core PCE came in at 0.2% and 3.0%, also under forecasts. FedWatch showed October hike odds falling to about 37% from above 80% earlier this month, with the next increase pushed to December. The yield surge has been driven mainly by inflation-adjusted real rates, now near 3% versus 1.7% before the Iran war in late February. Markets now price four hikes over the next 12 months, reversing earlier rate-cut expectations. Friday's September nonfarm payrolls report, forecast at 84,000 jobs, is the next key test.