10-Year Treasury Yield Tops 5.1%, Highest Since 2007, as Fed Hike Odds Jump

The 10-year Treasury yield jumped more than 14 basis points Wednesday to 5.116%, its highest level since July 2007, as strong economic activity data, rising oil prices, and growing Fed rate-hike expectations combined to push borrowing costs sharply higher across the curve.

The whole curve moved higher together

The selloff in Treasuries was broad-based rather than concentrated at one maturity. The 2-year yield rose more than 12 basis points to 4.906%, its highest since May 2024, while the 30-year yield gained more than 10 basis points to 5.41%, its highest level since mid-2007. A move of this size across short, medium, and long maturities in a single session points to a genuine repricing of the rate outlook rather than a technical, single-point move.

Strong activity data did the damage

S&P Global's September flash PMI readings came in hot: services activity hit 58.7 and manufacturing rose to 56.7, both comfortably in expansion territory. Combined with rising oil prices, the data reinforced the case that the economy — and inflation pressure with it — remains stronger than the bond market had been pricing in, even after last week's Fed rate hike.

Fed hike odds jumped overnight

CME FedWatch data showed the market pricing a 70% probability of an October quarter-point hike, up sharply from 55% just a day earlier. That's a meaningful one-day swing in rate expectations, and it's the clearest signal that today's data releases directly shifted how traders think the Fed will respond in its next meeting.

Auction demand came in soft

A five-year Treasury auction priced at a yield of 5.033%, with indirect bidders — a proxy for foreign and institutional demand — taking just 54% of the offering, well below the recent 65% average. Weaker-than-usual auction demand alongside rising yields suggests investors are requiring more compensation to hold government debt right now, adding another layer of pressure on top of the data-driven selloff.