U.S. Treasury yields reversed early declines and the bonds selloff resumed as an uncertain long-term outlook offset temporary inflation relief. The benchmark 10-year Treasury yield reached 5.304% Wednesday, its highest intraday level since May 2002, according to Tradeweb. Yields had slipped earlier, after the Commerce Department said that core PCE inflation rose by 3% over the 12 months ended in August, down from 3.3% a month earlier and milder than forecast. But the measure remains well above the Federal Reserve’s 2% target and the data was accompanied by output indicators showing the U.S. economy ran stronger than previously thought in the second quarter. Job creation in the private sector in September also was more than expected, according to ADP.

Long-term yields quickly approached recent highs. The two-year benchmark, which reacts more closely to interest rate expectations, lingered around intraday lows for a while, before picking up in the afternoon to 4.893%. The probability of a Fed hike in October fell to 37% from 45%, according to LSEG.

“For the Fed, the August PCE report is a glass half empty,” Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said in a note. “Inflation’s trend is lower but still not close to their target and not improving, either.” Adams said the Fed’s decision would depend on upcoming September inflation metrics. Oil prices, a key driver of recent spikes in yields, hovered near wartime highs, with Brent up 1% to $103.45 a barrel.

Persistent term-premium expansion tied to fiscal deficits, heavy Treasury supply, and massive corporate debt issuance backing AI infrastructure are likely to keep upward pressure on yields, said Patrick Munnelly, market strategist at Tickmill Group.