US Treasury Yield Breaks Through 5% as Inflation Fears Mount

The US Treasury yield has breached the 5 per cent mark for the first time since 2023, reflecting growing concerns about inflation. The yield on the benchmark 10-year US Treasury note briefly crossed 5 per cent on Monday before retreating to 4.96 per cent.

This move is significant because the 10-year Treasury yield influences borrowing costs across the US economy, impacting mortgage rates, corporate debt, and other consumer and business loans. The recent increase has already pushed US mortgage rates back towards 7 per cent.

The sharp rise in bond yields was driven partly by fears that disruptions linked to the Middle East conflict could keep energy prices elevated and add to inflation. Crude oil prices rose by as much as 5 per cent during Monday's session before moderating to an increase of about 1 per cent.

Investors are also preparing for the Federal Reserve's monetary policy decision this week, with a 93 per cent probability of an interest-rate increase. The Treasury has expanded its purchases of longer-term government debt in an attempt to contain long-term yields, but so far, these operations have failed to prevent yields from moving higher.