10-year Treasury yield posts biggest monthly gain since 2022: Chart of the Day

The bond market is entering a historically weak month as the 10-year Treasury yield ( ^TNX ) has just posted a seven-month streak of monthly increases.

On Thursday, the 10-year ( ^TNX ), a benchmark for mortgage rates and other borrowing costs, hovered near 5.29%, as shown on Yahoo Finance's AlphaSpace chart .

The benchmark yield also recorded a move higher of more than 50 basis points last month, marking its largest monthly increase since September 2022, as oil prices remained elevated and inflation concerns grew.

History offers little relief heading into October, typically a seasonally weak month for Treasurys.

Over the past decade, Treasurys have posted a median loss of 0.9% in September and 0.7% in October, according to Bloomberg data. That seasonal weakness is now colliding with a bond market already under pressure.

While the stock market hasn't fallen off a cliff, Wall Street is watching for the 10-year's critical threshold.

"Historical data show that valuations start compressing after 5.5%, and everyone from investors to corporations to consumers would have to redo the math on their investments," Fundstrat economic strategist Hardika Singh wrote in a note earlier this week.

Rising oil prices have been a major headwind, fueling inflation expectations and raising the odds of more Federal Reserve rate hikes.

But following Wednesday's cooler-than-expected inflation print, investors scaled back expectations for an increase at policymakers' October meeting.

Markets now see a roughly 35% chance of a hike, down from 50% on Tuesday, according to CME Group.

Yardeni Research's Ed Yardeni pointed out that the rise in yields may be due to the unwinding of the yen carry trade, in which investors borrow cheaply in Japan and invest in higher-yielding assets abroad.

"This trade allowed many governments [to] run budget deficits without putting upward pressure on their bond yields," Yardeni wrote. "Now, the chickens have come home to roost."

Ines Ferre is a Senior Business Reporter for Yahoo Finance covering the US stock market, publicly traded companies, and commodities.