US 10-year Treasury yield hits 24-year high on inflation fears

The yield on the benchmark US 10-year Treasury note climbed to its highest level since May 2002 on Wednesday, reaching 5.306% in intraday trading as persistent inflation concerns continued to weigh on government bond markets. The benchmark rate reached 5.306% during the session, narrowly exceeding the peak seen in May 2002 and extending a months-long selloff that has rattled fixed-income investors.

War and inflation drive selloff

Treasury yields, which move inversely to bond prices, have climbed with few interruptions since March, when the outbreak of the Iran war drove energy prices sharply higher and rattled global markets. Despite recent declines in oil prices, investors remain concerned that elevated energy costs could feed into broader inflation and prompt the Federal Reserve to maintain its tight monetary policy stance.

Stronger-than-expected economic activity and mounting concerns about heavy government debt burdens have also added sustained pressure to the bond market. The rise in long-term yields came despite softer-than-expected US inflation data released Wednesday, which led traders to scale back bets on another Federal Reserve rate increase next month.

Borrowing costs set to rise

The 10-year Treasury yield serves as a key benchmark for borrowing costs across the global economy, influencing everything from mortgage rates to corporate lending. Higher yields can increase financing costs for households and businesses while weighing on investment valuations and equity markets, slowing capital expenditure as companies face steeper fundraising expenses.