The benchmark Treasury yield breaks above 5% as a deepening bond sell-off sends borrowing costs higher and raises fresh concerns for stocks ahead of the Federal Reserve’s rate decision.
The US 10-year Treasury yield has surged to 5.025 per cent, its highest level since 2007, as investors step up selling of government bonds ahead of the Federal Reserve’s latest interest-rate decision.
The benchmark yield jumped more than 6 basis points to 5.025 per cent as of 1:10 a.m. ET on Tuesday, pushing decisively above the 5 per cent threshold after briefly crossing that level on Monday before retreating.
The sharp rise comes just as the Federal Reserve begins its two-day policy meeting, putting Treasury markets and the outlook for interest rates firmly in focus.
Investors are increasingly watching inflation data for clues about the Fed’s next move. August inflation remained well above the central bank’s 2 per cent target, adding to concerns that interest rates could stay higher for longer.
The move above 5 per cent could have significant consequences across financial markets. Higher Treasury yields make government bonds more attractive relative to riskier assets such as stocks, potentially encouraging investors to shift money away from equities.
At the same time, rising Treasury yields can push borrowing costs higher across the economy, affecting mortgages, corporate debt and other forms of credit. That could put additional pressure on companies and consumers.
The latest jump in yields also raises the stakes for the Fed’s upcoming decision. Investors will be looking for signals on how policymakers view persistent inflation, economic growth and the path of interest rates.
More from BusinessWith the 10-year Treasury yield now at its highest level since 2007, Wall Street is facing a fresh test as soaring bond yields threaten to tighten financial conditions even further.
