The 10-year Treasury yield surges, hits 2007 level

US stocks fell Wednesday as stronger economic data pushed Treasury yields to their highest levels in almost 20 years and increased expectations for more Federal Reserve rate hikes.

The bond market came under heavy selling pressure, with the 10-year Treasury yield recording its largest one-day jump in over a year. It climbed 0.14 percentage points to 5.11%, its highest level since 2007. The two-year yield rose 0.12 points to 4.90%, reflecting growing expectations for tighter central bank policy. The 30-year Treasury yield hit its highest level since mid-2007.

S&P Global’s flash Composite PMI rose to 58.4 in September, its strongest reading since July 2021, as new orders surged. The data suggested that the economy remains highly active, but also raised concerns that stronger demand could keep inflation elevated. Yields move inversely to prices.

Markets now see a 66% chance of a Fed rate hike in October, up from about 55% a day earlier.

Fed Governor Michael Barr also said further policy adjustments may be needed to bring inflation back to target.

Concerns over elevated inflation, fueled by high oil prices, stronger-than-expected US manufacturing data, and a Fed warning, rattled buyers.