30-year yield to break 6% this month? Economic resilience and inflation pressures drive rates higher, further intensifying the U.S. Treasury selloff.

U.S. Treasuries came under renewed selling pressure on Monday, pushing long-term yields to multi-decade highs. With the U.S. economy still expanding, AI infrastructure investment booming, and inflation pressures remaining elevated, investors are increasingly cautious about whether Treasury yields have already peaked. On Monday, both 10-year and 30-year Treasury yields rose by at least 7 basis points, climbing to 5.34% and 5.7% respectively, both hitting their highest levels since 2002. Short-term Treasury yields rose by about 2 to 4 basis points. Treasury yields have been climbing steadily since mid-August. On one hand, the market needs to digest strong economic growth and the capital demands driven by AI investment; on the other, stubbornly high inflation makes it difficult to rule out the possibility of further Federal Reserve rate hikes. Earl Davis, head of fixed income at BMO Asset Management, said Monday that the 30-year Treasury yield breaking above 6% is "inevitable" and will likely happen this month. If that prediction comes true, the 30-year Treasury yield would reach a level not seen since 2000. Davis believes that current bond market volatility is creating a loop that pushes rates even higher, keeping long-term yields under continued upward pressure. Meanwhile, U.S. services sector data released Monday further reinforced the bond market's cautious sentiment. The September ISM services report showed that the pace of U.S. services expansion slowed somewhat, but price pressures heated up noticeably. The prices paid index rose to 74, exceeding market expectations and marking the highest level since July 2022. Vail Hartman, a strategist at BMO Capital Markets, said the report overall reflects intensifying inflation pressures alongside still-strong nominal economic growth, further reinforcing the core factors that have been weighing on the bond market for the past several weeks. As Treasury yields continue to climb recently, it is becoming increasingly difficult for the market to determine where the ceiling for long-end rates actually lies. The U.S. economy remains in expansion, and the AI infrastructure buildout boom is driving corporate capital expenditure growth. At the same time, renewed price pressures in the services sector mean the disinflation process could remain bumpy. Together, these two factors support market expectations that interest rates may stay elevated for longer. Interest rate swap markets show that traders currently price about a 25% probability of a Fed rate hike at the October meeting, and have essentially fully priced in a 25 basis point increase by the December meeting at the latest. Therefore, even though market bets on immediate Fed action in October are not high, investors still expect the possibility of further monetary tightening in the coming months. For long-end Treasuries, strong growth, sticky inflation, and potential rate hikes together constitute pressure. A series of U.S. Treasury auctions scheduled for this week will also serve as an important window to gauge investors' willingness to accept current high yield levels. The Treasury coupon auction cycle kicks off Tuesday with a $58 billion 3-year note auction. The subsequent 10-year and 30-year auctions will draw more market attention, because with long-end yields continuing to hit multi-year highs, auction demand will directly test whether investors are willing to add long-term U.S. government debt at current price levels. If demand for long-bond auctions is weak, it could further exacerbate market concerns about the supply-demand dynamics for long-term Treasuries. Conversely, if high yields attract strong buying interest, it could provide some support for the bond market that has been under sustained pressure recently.