On Thursday, October 9, US Treasury yields surged early but reversed course, closing lower across the board.

The 2-year Treasury yield fell 1 basis point to 4.76%, the 3-year yield dropped 1.3 basis points to 4.893%, the 5-year yield declined 3.6 basis points to 4.992%, the 10-year yield fell 5.1 basis points to 5.235%, and the 30-year yield dropped 6.6 basis points to 5.607%.

Driven by renewed geopolitical tensions in the Middle East, international crude oil futures prices rose sharply on the morning of October 8, with both light crude oil futures on the New York Mercantile Exchange and Brent crude oil futures in London surging over 5% at one point. Data showed that the November light crude oil futures contract on the New York Mercantile Exchange climbed to as high as $92.84 per barrel, up 5.17% from the previous day's closing price. The December Brent crude oil futures contract in London rose to as high as $105.48 per barrel, up 5.27%.

With oil prices spiking, combined with Middle East risks and supply pressures, the 30-year Treasury yield touched 5.732% during intraday trading, while the 10-year Treasury yield reached a high of 5.354%, both marking the highest levels since 2002.

The subsequent auction results triggered a rebound in Treasury yields. On Thursday, the US Treasury issued $22 billion in 30-year government bonds, with a winning yield of 5.618%, lower than the expected level at the bid deadline, and a bid-to-cover ratio of 2.54, indicating relatively solid demand. Data showed that indirect bidders were allocated 72.3%, higher than the average of 68.6%.

Later, US President Trump posted on social media that the United States and Iran are engaged in "productive" consultations, and that the US will not attack Iran before the congressional midterm elections. Trump stated in his post that although Iran's economic and military situation is "very bad," and although the US will continue its blockade and large amounts of oil are being transported through the Strait of Hormuz, "at any time before the US midterm elections on November 3, we will not attack Iran."

Affected by this, Treasury yields accelerated their decline, with the yield curve hitting intraday lows across the board. The 30-year Treasury yield retreated 12 basis points, and the 2s10s spread narrowed to 47 basis points. At the same time, oil prices fell sharply from their highs.

Jay Hatfield, CEO of Infrastructure Capital Management, believes that the peak in 10-year yields may have already occurred around 5.30%, and the market's pessimistic expectations for Federal Reserve rate hikes have reached their peak. He expects the Fed to raise rates only once in this cycle, rather than the three times currently priced in by the market.

David Zervos, a Wall Street veteran who recently became a senior adviser to US Treasury Secretary Bessent, said, "After the energy shock caused by the US-Iran war is resolved, bond yields may decline."