US 10-Year Treasury Yield Breaches 5 Percent for First Time Since 2023 as Fed Rate Hike Expectations Hit 88 Percent Ahead of Wednesday Decision

The US 10-year Treasury yield briefly surpassed 5 percent on Monday September 14 for the first time since October 2023, reaching as high as 5.01 percent before pulling back to around 4.94 percent by early afternoon in New York, according to Bloomberg and CNBC. The move came as markets priced in an 83 to 88 percent probability of a Federal Reserve rate hike at Wednesday's policy meeting, up sharply from earlier in the month, following Friday's August CPI report that showed core inflation rose 0.3 percent month-on-month, above the 0.2 percent consensus. A Reuters poll from September 9 showed 86 of 101 economists expect the Fed to raise rates by 25 basis points to 3.75 to 4.00 percent. The 30-year yield also remained elevated at 5.38 percent. If the 10-year yield moves beyond 5.02 percent, it would reach its highest level since July 2007, before the Global Financial Crisis. The breach of the 5 percent threshold carries significant implications for borrowing costs across the economy. Mortgage rates have already moved above 7 percent, with the 30-year fixed rate averaging 6.76 to 6.89 percent as of September 14 according to Freddie Mac and Money.com, marking the highest levels since June 2025. The yield surge stems partly from a supply-demand imbalance as enormous debt issuance by the Treasury and corporations competes for investor capital, with JPMorgan estimating more than 1 trillion dollars of corporate debt will need to be refinanced in 2026. Rising oil prices added further inflationary pressure after Saudi Arabia shut down the critical East-West pipeline following drone attacks from Iraqi territory. Markets are currently pricing in a 25 basis point rate hike on Wednesday, with another rate hike expected later this year, according to Trading Economics and multiple Fed forecasting sources.