The benchmark 10-year US Treasury yield rose above the key 5% level on Monday
for the first time in nearly three years ahead of this week’s Federal Reserve
meeting, as markets priced a greater likelihood of Fed hikes to curb inflation.
Friday’s data showed US CPI accelerated in August, intensifying those
expectations. Tom di Galoma, managing director at Mischler Financial, said this
“may be the straw that breaks the camel's back.” Yields have climbed over the
past month amid higher rate bets, increased corporate and government debt
issuance, a firmer growth outlook and concern over the US long-term fiscal path.
Di Galoma added: “Our budgets, deficits and overall debt profile continue to
expand.” Whether the 10-year can hold above 5% will be a key test of if the
economy and equity markets can sustain higher rates.
