Oil spike drives the 30-year Treasury yield to its highest since 2007, and equities rebound the next session

A renewed oil spike pushed long-dated Treasury yields to levels not seen in nearly two decades, and the equity reaction split neatly across two sessions. Brent crude reached a four-month high of $109.97 intraday after a roughly 6% jump the prior day, before pulling back toward $104. West Texas Intermediate crossed $100 on Thursday and was back near $99.52 by Friday.

The bond move is the one to size carefully, because the tenor matters. The 30-year Treasury yield hit 5.32% to 5.42%, its highest since 2007, roughly a 19-year high rather than a multi-decade one. The 10-year yield, the tenor most headlines mean by "Treasury yields," reached about 4.94% to 4.99%, a roughly three-year high. Conflating the two overstates the move at the front of the curve where policy is actually priced.

Equities did not sell off continuously. On Thursday the Dow fell about 0.4%, the Nasdaq 0.41% and the S&P 500 0.48%. By Friday, after the CPI release, all three had rebounded, with the Dow up 0.96%, the S&P 500 up 0.94% and the Nasdaq up 1.02%. Asia took the harder hit on the way through: MSCI Asia Pacific fell 1.3%, the Nikkei 1.9% and the KOSPI 1.8%, with chipmakers leading losses as SK Hynix dropped 3.4%, Samsung 3.9% and Kioxia 7.8%.

The inflation data is what turns an energy move into a rates move. August producer prices rose 5.4% year over year, up from 4.8% in July, with core PPI at 4.6%. Headline CPI rose 0.4% month over month. Market-implied odds of a Fed hike at the September 15-16 meeting moved from about 70% on Thursday to roughly 85% on Friday after the print, while the ECB lifted its deposit rate a quarter point to 2.5% in the same week. What to watch is the long end: if 30-year yields hold above 5.3% while crude stays near $100, the equity rebound is borrowing against a discount rate that has not come back down.