U.S. 5-year Treasury note auction pays highest yield since 2006

The 10-year Treasury yield reached a 10-year high of 5.07% on Wednesday, surpassing the 5.07% mark last noted in 2007. The 30-year Treasury yield also hit 5.37% as stock markets declined. The surge in yields stems from rising oil prices and unexpectedly strong business activity data, which have raised fears of more Federal Reserve interest rate hikes.

Fed Governor Michael Barr hinted at additional rate hikes necessary to curb persistent inflation. With Brent crude oil prices for November delivery trading near $100 per barrel, and President Trump backing a ban on US diesel exports, concerns about fuel shortages and higher energy costs have grown. The S&P Global Manufacturing PMI rose to 57 in September, above economists' expectations of 53.6, indicating robust manufacturing activity.

Economist Gregory Daco of EY-Parthenon predicted a potential 25-basis-point rate hike in December, warning of a possible stock market correction. Rising yields reflect investors' demand for greater compensation for the risks of holding government debt. Increased corporate borrowing for AI infrastructure projects has also added to bond supply competition.

Higher yields, inversely related to bond prices, elevate borrowing costs for consumers and businesses. The Federal Reserve increased its benchmark rate by 25 basis points earlier this month to combat inflation, which remains above the 2% target. Senior business reporter Ines Ferre from Yahoo Finance covered this story.