10-Year Yield Hits 5% Then Reverses Ahead of Fed Decision — SkimNews
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- The 10-year Treasury yield touched 5.014%—its highest since October 2023—before reversing to 4.947%, down more than 2 basis points, ahead of the Fed's Tuesday-Wednesday policy meeting; a move beyond 5.02% would mark the highest level since July 2007.
- The 2-year Treasury yield fell more than 2 basis points to 4.615% after touching its highest level since July 2024 last week, while the 30-year yield dropped more than 3 basis points to 5.321%.
- CME FedWatch pricing shows 90% odds of a 25 basis point Fed rate hike this week, after Friday's August CPI report matched expectations while remaining well above the Fed's 2% inflation target for the fifth straight year.
- Jay Woods, chief market strategist at Freedom Capital Markets, said hiking would be the 'cleaner decision' and that the market may rally with a hike, but no change 'may cause a negative market reaction as it screams once again the Fed is behind the curve.'
- Jason Ware, CIO at Albion Financial Group, attributed the yield climb partly to a supply-demand imbalance as enormous Treasury and corporate debt competes for investor capital, arguing stocks are more vulnerable to a consumer spending or AI investment slowdown than the 5% threshold itself.
- Scott Bessent's expanded bond buyback program has failed to contain long-end pressure; BMO Capital Markets strategists said more active buybacks could limit selling pressure but 'fail to address the prevailing fundamental drivers' of upward yield pressure, measured against $1.2 trillion in daily Treasury market turnover.
Why it matters: A push past 5.02% on the 10-year would take yields to levels last seen before the 2008 financial crisis, dragging mortgages, auto loans, and credit card rates higher with it. The underappreciated angle is structural: massive Treasury and corporate debt issuance competing for investor capital means Bessent's buybacks are treating a symptom, not the disease driving yields higher.
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