US Treasury Yields Top 5% for First Time Since July 2007
US Treasury yields have broken through the 5% barrier, touching 5.04% in mid-September for the first time since July 2007. The 10-year yield has since settled around 4.95%, but experts say this marks a significant shift: cheap money is over, and the bill is coming due.
The Federal Reserve raised the federal funds rate by 25 basis points to a target range of 3.75% to 4.00% during its September 16-17 FOMC meeting, its first rate hike since 2023. Fed Chairman Kevin Warsh described inflation as 'too high… for too long.'
Three forces are driving the selloff: stubbornly elevated inflation, oil prices pushing above $100 per barrel due to geopolitical tensions, and the US government's massive borrowing needs.
The ripple effects of higher yields are already being felt. Mortgage rates have spiked, pricing many buyers out of the housing market. Corporate borrowing costs have also increased, squeezing companies that need to refinance debt or fund new projects.