US Treasury Yields Soar Past Multi-Decade Highs Amid Fed Rate Hike Expectations
US Treasury yields have surged to multi-decade highs, with the 30-year bond yield reaching 5.501% after market close on Wednesday. This marks its highest level since 2004.
The 10-year Treasury yield also climbed to 5.22%, a peak not seen since June 2007. The bond sell-off intensified, driving down bond prices and pushing yields higher, with the yield on the 2-year Treasury rising to 4.94%.
Market participants are increasingly betting that the Federal Reserve will implement additional rate hikes following this month's 0.25 percentage point increase. According to the CME FedWatch Tool, the probability of another rate hike at the October FOMC meeting has jumped significantly to approximately 70%, up from 49% just a week ago.
Experts suggest that a combination of inflationary pressures and geopolitical factors are contributing to this upward pressure on interest rates. The sharp rise in long-term Treasury yields is translating into higher borrowing costs for the real economy, with the interest rate on 30-year fixed-rate mortgages surpassing 7%.