U.S. 10-yr Treasury yields rise further above 5%, hit highest level since 2007

U.S. 10-year Treasury yields surged to their highest level since early-2007 on Tuesday, surpassing the 5% mark for the first time since 2007. The 10-year rate experienced a 1.3% increase, reaching an intraday high of 5.030%, before stabilizing near that level by 01:20 ET (05:20 GMT). This sharp rise in yields is attributed to growing confidence in the Federal Reserve's decision to increase interest rates by at least 25 basis points this week.

The anticipation of a hike was bolstered by persistent inflation pressures above the Federal Reserve's target of 2% annual inflation. Additionally, concerns over the deteriorating U.S. fiscal health, characterized by a widening deficit and soaring debt levels, suggest that investors are demanding a higher yield premium to continue purchasing U.S. debt.

The 5% level holds significant psychological importance for the 10-year benchmark, potentially posing a threat to the already fragile stock market rally as investors seek higher and safer yields in debt rather than equities. Consequently, U.S. stock futures plummeted sharply lower early on Tuesday following the sudden spike in yields, with S&P 500 Futures declining by 0.3%.