10-year Treasury yield hits 5% ahead of Fed decision — SkimNews
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- 10-year Treasury yield rose more than 2 basis points to 5% on Monday — the highest since October 2023 — and would reach its highest since July 2007 if it surpasses 5.02%, before the Global Financial Crisis.
- 2-year Treasury yield advanced more than 2 basis points to 4.666% after touching its highest since July 2024 last week, while the 30-year yield rose 2 basis points to 5.374%.
- Federal Reserve rate-hike odds stand at 90% for this week's Tuesday-Wednesday policy meeting per CME Group's FedWatch tool, after Friday's August CPI report matched expectations but remained far above the Fed's 2% inflation target.
- Jason Ware, chief investment officer at Albion Financial Group, attributed part of the yield rise to a supply-demand imbalance as heavy Treasury and corporate debt issuance competes for investor capital, arguing higher yields aren't bearish if accompanied by resilient growth.
- Scott Bessent has tried to contain long-end pressure via an expanded bond buyback program, but BMO Capital Markets strategists said those efforts 'fails to address the prevailing fundamental drivers' measured against $1.2 trillion in daily Treasury market volume.
- George Awad, principal at Gibraltar Capital, flagged leveraged hedge fund exposure in cash-futures basis trades, warning that higher funding costs, margin requirements or volatility could force simultaneous position unwinds, amplifying any sell-off.
- S&P 500 remains up more than 11% for the year even as the 10-year crossed 4.85% earlier, with BMO noting equity weakness has remained modest and investors willing to tolerate higher yields for now.
Why it matters: With a 90% odds of a Fed rate hike already priced in, the real risk sits at the long end: BMO says Bessent's expanded buybacks can't overcome the $1.2 trillion daily Treasury market's supply-demand imbalance, while Gibraltar Capital's Awad warns leveraged hedge fund basis trades could turn a yield spike into a disorderly rout if funding costs jump.
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