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The 10-year Treasury yield crossed 5% for the first time in 16 years, propelled by expectations the Federal Reserve will maintain elevated interest rates and that the government will further boost bond sales to cover widening deficits.
The yield rose 11 basis points to 5.02%, the highest since 2007.
Fed Chair Jerome Powell suggested last week that central bankers are inclined to hold rates steady at their November meeting, but remain open to hiking again if a resilient economy fans inflation risks.
“If the Fed is being cautious on moving front-end rates higher again at a time when growth is still resilient and inflation sticky, the market is left with no alternative but to reflect it in long-end rates,” Rohan Khanna, head of European rates strategy at Barclays Plc wrote in a client note Monday.
The rise in the global bond benchmark above the psychological level of 5% underscores investors’ assumption that the Fed and fellow central banks are unlikely to cut borrowing costs quickly amid sticky inflation, even in the event that they soon call a halt to rate hikes.
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