The yield on the 10-year US bond soared on Tuesday to its highest level since 2007, as sell-offs of US sovereign debt intensified ahead of the Federal Reserve's critical decision on interest rates. The yield on the 10-year Treasury surged by more than 6 basis points, reaching 5.025%. A day earlier, on Monday, the 10-year yield briefly passed above 5%, before retreating slightly. It should be recalled that in 2010, when borrowing costs for Greece exceeded 5%, borrowing became unsustainable, forcing the country to turn to the International Monetary Fund.
Federal Reserve decision in focus
The fresh surge in yields comes just prior to the Federal Reserve's two-day monetary policy meeting, which begins today, September 15, 2026. Markets are now pricing in increased odds of a new rate hike of 25 basis points, as August inflation remained significantly above the 2% target set by the US central bank. According to the CME FedWatch tool, traders are pricing in a greater than 92% probability that the Fed will raise interest rates by 25 basis points at its latest meeting. This development increases pressure on the government bond market, as investors re-evaluate both the trajectory of inflation and the prospect of rates remaining at elevated levels for an extended period.
Jonathan Liang: 10-year Treasury remains highly vulnerable to inflation
"10-year US Treasuries are particularly sensitive to inflation expectations and, as inflation metrics continue to hover above the Fed's 2% target, we believe this strong correlation will likely persist for some time," said Jonathan Liang, CIO at Standard Chartered for fixed income and foreign exchange. The rise of the 10-year yield above 5% marks a major milestone for markets, as the US Treasury serves as a core benchmark for funding costs across the entire global economy. At the same time, this trend raises borrowing costs for businesses and households, while exerting additional pressure on equity valuations and broader investment portfolios. Market focus now shifts to the Federal Reserve's decision and, crucially, to the signals it will send regarding the future path of US rates.
www.bankingnews.gr
Readers’ Comments