European bond markets continued to show pressure as energy prices rose ahead of the European Central Bank's rate decision. The move came amid a broader rise in Treasury yields and renewed geopolitical risk in the Middle East.
The U.S. Treasury Department said it would buy back up to $6 billion in 10-year to 20-year maturities on Thursday, an increase from the $2 billion size previously announced. Last month, the department said it would raise buyback sizes to at least $4 billion, while media reports had anticipated at least $10 billion.
Following the announcement, U.S. Treasury yields added to gains on Wednesday. The benchmark 10-year yield rose 4.2 basis points to 4.846%, after it had earlier climbed 1.2 basis points to 4.816%. The yield could move toward the 5.0% level. The rate-sensitive 2-year yield increased 2.5 basis points to 4.423%.
Oil markets also contributed to the risk backdrop. Brent crude futures topped $100 a barrel, crossing the triple-digit mark for the first time since May. At the time of data logging, Brent was trading at $101.75, up 0.09%.
The rise in energy prices came as escalating military engagements in the Middle East continued. Iranian-backed Houthis in Yemen launched coordinated strikes on several Saudi Arabian cities on Tuesday. Direct U.S. attacks were reported on multiple Iranian oil tankers, and a retaliatory Iranian missile strike targeted a U.S. military base in Jordan.
U.S. economic data added to the inflation debate. August nonfarm payrolls showed employers added an unexpected 162,000 jobs. Financial futures assigned roughly a 60% probability to a 25-basis-point interest rate increase at the Federal Reserve's policy meeting scheduled for September 15-16.
The U.S. Producer Price Index is due Thursday, while the Consumer Price Index is scheduled for Friday. The data releases fall ahead of the Federal Reserve's policy meeting and the ECB's rate decision.
