10-year Treasury yield holds above 5% after topping its 2007 peak

US government borrowing costs are at levels last seen before the global financial crisis. The 10-year Treasury par yield reached 5.31 percent on October 5, according to the daily yield curve published by the US Treasury Department, after closing September at 5.29 percent. The highest reading in June 2007, the previous peak period in the same series, was 5.26 percent on June 12 of that year.

The climb was fast. The 10-year yield stood at 4.79 percent on September 1, crossed 5 percent on September 15, the day before the Federal Reserve raised its policy rate, and rose through the second half of the month as inflation data and oil prices pushed expectations for further rate increases higher. Bloomberg reported on October 1 that the yield had briefly traded at its highest level since 2002 before falling back as concern about France's fiscal position drove demand for US bonds as a haven, with the 2-year yield dropping as much as 14 basis points to 4.74 percent that day.

Yields have eased slightly since. The 10-year yield fell to 5.09 percent on October 16 and was 5.12 percent on October 20. The 2-year yield was 4.79 percent and the 30-year yield 5.42 percent, leaving the curve upward sloping from two years out.

Higher long-term yields raise mortgage rates and corporate borrowing costs and reduce the present value of future profits, which has weighed on long-duration technology stocks. CNN reported that rising borrowing costs and concern about debt-funded AI infrastructure contributed to the Nasdaq's worst week since June in the week to October 16, when Brent crude touched 110 dollars a barrel and added to fears of further Fed tightening.

The Federal Reserve meets on October 27 and 28. Futures markets price no change in rates at that meeting, according to CaixaBank Research, but the bond market has already moved: the 10-year yield has risen by roughly half a percentage point since the start of September.