Bond Market Flashes Red: Treasury Yields Hit Levels Not Seen Since 2007
TLDR
- The 10-year Treasury yield climbed to 5.041%, its highest point since 2007
- Markets are pricing in a 92%+ chance of a 25 basis point Fed rate hike this week
- August inflation remained well above the Fedโs 2% target, fueling rate hike bets
- Rising oil prices are tightening their correlation with Treasury yields, adding upward pressure
- S&P 500 futures fell 0.3% after the yield spike
The 10-year Treasury yield hit its highest level since 2007 on Tuesday, breaking above the key 5% threshold as markets brace for a likely Federal Reserve rate hike.
The yield climbed to an intraday high of 5.041% before settling around 5.014% in early trading. The 30-year Treasury bond yield also rose, reaching 5.381%. The 2-year note moved up to 4.663%.
Traders are now pricing in more than a 92% chance that the Fed will raise rates by 25 basis points at its two-day policy meeting, which started Tuesday, according to the CME FedWatch tool.
The main driver is inflation. August price data showed inflation still running well above the Fedโs 2% annual target, giving the central bank reason to keep tightening.
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