U.S. Treasury bond yields surged across the board midweek on a mix of strong economic data and greater expectations of further Federal Reserve rate hikes.

The primary 10-year yield—a leading benchmark for a broad array of business, consumer, and government borrowing costs—jumped by 15 basis points to 5.12 percent at 2:08 p.m. ET on Sept. 23.

This is the highest level the 10-year has reached since July 2007.

Government bond yields rose across the curve in the middle of the trading week.

The 30-year Treasury yield popped by more than 10 basis points to 5.41 percent, the highest level since 2004.

The 2-year yield, which is sensitive to Federal Reserve policy expectations, climbed by almost 13 basis points to 4.91 percent, also the highest since early 2024.

Meanwhile, the Treasury posted the highest 5-year auction yield since 2006 of 5.03 percent. The $70 billion bond sale posted mixed demand, with foreign investors accounting for more than half of the purchases.

‘Clearly Booming’

U.S. business conditions accelerated this month, driven by robust activity in the manufacturing and services sectors.

S&P Global’s PMI (purchasing managers’ index) output in September advanced to 58.4, up from 56 in August. This marked the strongest reading in more than five years and—setting aside the COVID-19 pandemic-era distortions of 2020 and 2021—the firmest expansion since 2015.

“US business continues to boom,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “Business is clearly booming now in both manufacturing and services.”

Domestic firms, however, still struggle with rising inflationary input pressures from higher fuel and transportation costs driven by elevated war-related crude oil prices.

Still, the U.S. economy is withstanding various headwinds and is on track for third-quarter gross domestic product growth of about 5 percent, according to the Atlanta Fed’s GDPNow Model estimate.

Weekly unemployment claims and durable goods orders for August will be the next batch of major economic reports this week.

More Rate Hikes Needed: Barr

The U.S. bond market further reacted to Fed Governor Michael Barr’s comments about additional interest rate hikes to ensure that the central bank returns to its 2 percent target.

In a Sept. 23 speech at the Chicago Fed, Barr said risks to achieving price stability were growing, and labor market challenges were receding.

“In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion,” Barr stated. “We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that.”

A growing chorus of other Fed officials has also expressed support this week for further rate hikes if necessary.

The odds of the Fed raising interest rates for the second straight meeting increased. According to new CME FedWatch data, the chance of an October hike is almost 70 percent.

Others are not so certain that the Fed will pull the trigger on another increase.

“We are in the camp that the Fed is one and done for the year,” Ken Mahoney, president and CEO of Mahoney Asset Management, said in a note emailed to The Epoch Times.

“We think tapping the brakes can actually be a good thing, as it helps avoid getting too far behind the eight ball and running into what [Jerome] Powell ultimately had to do, raising rates by 75 basis points multiple times in a row.”

The Fed will hold its next policy meeting on Oct. 27 and Oct. 28.

More Debt Buybacks

Later in the day, the Treasury Department confirmed that it will purchase up to $6 billion of longer-dated government debt on Sept. 24.

The new, updated debt buyback operation for 20- and 30-year bonds is three times larger than the $2 billion limit that Treasury originally outlined to investors in early August. That plan was eliminated after a surprise Aug. 19 update, when officials said they would “at least double” the size of the operations.

Treasury Secretary Scott Bessent defended these buybacks, telling CNBC’s “Squawk Box” on Sept. 21 that the bond market was “moving away from equilibrium” during a “very illiquid period” last month.

Based on the Sept. 9 schedule, the Treasury still aims to repurchase between $750 million and $4 billion in short- and long-run government bonds.

The Treasury estimates that it has repurchased almost $500 billion in bonds over the course of approximately 150 operations.