US Treasury Yield Hits 5% as Markets Price in Rate Hike

The US Treasury yield has reached its highest level since October 2023, climbing to 5% on Monday. This increase in yields is attributed to investors positioning for the Federal Reserve's interest-rate decision later this week.

According to Jay Woods, chief market strategist at Freedom Capital Markets, a rate hike would be 'the cleaner decision' based on economic data and current market expectations. The 30-year Treasury yield also gained 2 basis points to 5.374%, while the 2-year Treasury yield rose more than 2 basis points to 4.666%.

The Federal Reserve's policy meeting will take place on Tuesday and Wednesday, with markets increasingly pricing in a 25-basis-point rate hike. The CME Group FedWatch tool puts the probability at 90%, while Prime Terminal showed the odds at 93%. Investors are closely watching the central bank's updated economic projections and its 'dot plot' for indications about the future path of interest rates.