US 10-Year Treasury Yield Hits 5% as Fed Hike Odds Rise

The yield on the benchmark 10-year U.S. Treasury note reached 5% on Monday, its highest level since October 2023, as investors priced in expectations that the Federal Reserve will keep interest rates higher for longer. The move, which briefly pushed the yield to 5.01%, marks a key psychological threshold and is increasing borrowing costs across the economy. The surge in yields has been driven by a combination of factors, including persistent inflation concerns, rising oil prices, and worries about the U.S. fiscal trajectory. Market expectations for a Federal Reserve rate hike at its upcoming meeting have climbed sharply, with the CME Group's FedWatch tool showing odds above 90%. The central bank is scheduled to announce its decision on Wednesday. Higher Treasury yields are flowing through to consumer and business loans. The average 30-year fixed mortgage rate has risen above 7%, and borrowing costs for auto loans, credit cards, and corporate debt are also increasing. The yield on the 30-year Treasury bond gained 2 basis points to 5.374%. The Treasury Department announced it would triple its buyback of longer-term debt to $6 billion in an effort to ease pressure on yields.