The yield on the 10-year U.S. Treasury surged to its highest level in more than 19 years Wednesday. Strong economic data increased expectations that the Federal Reserve could raise interest rates again.
The benchmark 10-year yield climbed as high as 5.12% during afternoon trading on Sept. 23. That marked its highest level since July 2007.
Treasury yields moved higher across the board. The 30-year yield rose more than 10 basis points to 5.41%, its highest level since 2004. The two-year yield climbed nearly 13 basis points to 4.91%, reaching its highest level since early 2024.
Bond prices and yields move in opposite directions. When investors sell Treasury bonds, their prices fall and yields rise.
The latest jump followed economic reports showing continued strength in the U.S. economy. S&P Global’s composite purchasing managers’ index rose to 58.4 in September from 56 in August. The index measures activity across the manufacturing and services sectors.
The September reading was the strongest in more than five years. Excluding unusual pandemic-era readings in 2020 and 2021, it represented the strongest expansion since 2015.
Breitbart reported that the reading was also the highest since July 2021 under the publication’s measure of the composite index.
Strong economic activity has raised expectations that borrowing costs could remain elevated for longer. Investors are also increasingly considering another interest rate increase from the Federal Reserve later this year.
Fed Governor Michael Barr added to those expectations Wednesday. Barr said additional monetary policy tightening would likely be needed to bring inflation back toward the central bank’s 2% target.
Market expectations shifted following the remarks. CME FedWatch data showed the probability of another rate increase at the Fed’s October meeting had risen to nearly 70%. The central bank’s next policy meeting is scheduled for Oct. 27 and Oct. 28.
Other Treasury market indicators also reflected higher borrowing costs. The Treasury’s five-year auction produced a yield of 5.03%, the highest since 2006. The $70 billion sale attracted mixed demand, while foreign investors accounted for more than half of purchases.
The Atlanta Fed’s GDPNow model meanwhile estimated third-quarter economic growth at about 5%. Weekly unemployment claims and August durable goods orders are among the next major reports investors will watch for signs of whether economic momentum is continuing.