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Home»Economics»10-year Treasury yield hits 5%, critical threshold for US economy and markets
Economics

10-year Treasury yield hits 5%, critical threshold for US economy and markets

By CharlotteSeptember 14, 20265 Mins Read
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New York — 

The rise in bond yields reached a critical threshold on Monday, with the 10-year Treasury yield hitting 5%, a level briefly touched in 2023 and otherwise not seen since 2007.

The 10-year yield’s rise to multi-year highs could mean higher costs for Americans who want to buy a home, finance a car or take out other loans.

Bond yields have marched higher this year, pushing up borrowing costs for consumers, businesses and the US government. Yields have climbed despite efforts by Treasury Secretary Scott Bessent to quell concerns in the bond market.

The global bond market, dominated by the almost $32 trillion US Treasury market, has sold off as investors grapple with a mosaic of concerns, from soaring energy prices and expectations for central banks to raise interest rates to uncertainty about the war with Iran and unchecked government spending amid mounting debt.

Yields on government bonds across the globe have touched multi-year and multi-decade highs this year, raising the cost of borrowing money. It’s compounding concerns about affordability, adding to unease about governments’ enormous debt burdens and threatening to weigh on the stock market.

Yields rise when bond prices falls. The bond market sell-off this year has pushed prices lower and sent the 10-year yield toward levels not seen in nearly two decades. The 10-year yield is now at its highest level since October 2023 and just a whisker away from its highest level since 2007, which was the last time the 10-year yield rose firmly above 5%.

The 10-year yield entered the year trading at 4.15%, and dipped below 4% in February. After the start of the war with Iran, yields sharply reversed course and started climbing – and they’ve yet to stop. The 10-year yield hit 4.5% in May before hitting 5% on Monday.

After hitting 5% on Monday morning, the 10-year yield pulled back and traded just below that threshold, still at its highest level since October 2023.

Higher bond yields translate into higher interest rates, making borrowing money more expensive.

The 10-year yield is the benchmark for borrowing costs across the economy. Rising yields can push up the interest rates people pay on their mortgages and other loans.

The housing market is where higher yields can really sting. Mortgage rates closely track the 10-year Treasury yield. As the 10-year yield has surged this year, the average 30-year mortgage rate has climbed to its highest level in more than a year.

The rise in yields has sent mortgage rates climbing. The average 30-year fixed mortgage rate rose to 6.76% last week, up from 6.15% at the start of the year.

Higher bond yields can impact analysts’ calculations for companies’ future earnings and stocks’ value. Higher yields on trustworthy government bonds can also draw investors away from riskier assets like stocks.

A rise in bond yields can put pressure on stocks, but it depends on the context in which yields are rising and how volatile the moves are.

When yields spike dramatically or volatility rears its head, it can send shocks through the stock market. That was the dynamic in April 2025, when President Donald Trump’s tariffs rocked financial markets. The 10-year yield spiked, the dollar dropped and stocks took a dive.

Yet yields this year have steadily climbed, and the S&P 500 is still up more than 10%. When stocks are soaring because of strong corporate earnings, that can outweigh nerves about higher yields.

Markets might be able to handle steadily climbing yields, especially if economic growth is robust. But higher borrowing costs do create more risks for stocks. If earnings were to take a hit, higher yields could become a bigger problem for stocks.

The 10-year yield at 5% “is seen by some as a threshold above which financial markets might go into meltdown,” John Higgins, chief economic adviser for financial markets at Capital Economics, said in a note.

“While we aren’t convinced that 5% is that ‘magic’ number, higher Treasury yields would certainly pose a risk to the sustainability of the US’ public finances as well as threaten equities,” Higgins said.

The rise in global yields isn’t entirely surprising, analysts say, and could signal that the era of ultra-low interest rates is over, with rates trading at levels more typical of past decades.

After the 2008 financial crisis, central banks across the globe lowered interest rates to ultra-low levels.

Now, global markets are moving on from that era. That shift started in 2022, when central banks hikes rates to tamp down inflation sparked by the pandemic and Russia’s invasion of Ukraine.

The 10-year yield traded at 1.3% five years ago. Now, it is at 5%.

“What we’ve been communicating to our clients is ‘normal for longer,’ meaning these factors are here to stay,” Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute, told CNN.

There’s been a sustained push higher in yields across the globe this year, which picked up after the start of the war with Iran. Ten-year yields in Germany, France and the United Kingdom are all at levels not seen in more than a decade.

Yields are rising as higher energy prices push central banks to raise interest rates to tamp down inflation. The European Central Bank raised interest rates last week, its second hike this year.

In the backdrop, investors are increasingly skeptical of governments’ bloated budgets and mounting deficits.



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