The 10-year Treasury note yield jumped more than 14 basis points to 5.116% on Wednesday, its highest level since July 2007, in the benchmark's biggest one-day move in nearly 18 months.
The move accelerated after the 10-year yield broke through the 5% level. It was the largest one-day increase since April 7, 2025, when the yield surged 16.6 basis points. The 2-year Treasury yield, which is most sensitive to expected Fed policy changes, rose more than 12 basis points to 4.906%, its highest since May 2024, as traders increased bets on another Fed rate hike in October. The 30-year Treasury yield gained more than 10 basis points to 5.41%, the highest since mid-2007. One basis point equals 0.01%, and yields move inversely to prices.
Drivers behind the move
- S&P Global's services PMI jumped to 58.7 in September from 56.5 in August, its highest level in nearly five years; the manufacturing PMI rose to 56.7, a level not seen in more than four years.
- Chris Williamson, S&P Global Market Intelligence's chief business economist, said "US business continues to boom," calling it the greatest improvement in business activity since early 2015, excluding the post-COVID reopening surge. He noted input costs jumped at the steepest rate in four years, driven by rising fuel and transport costs tied to higher oil prices.
- Fed Governor Michael Barr said "further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," adding that price stability is crucial to supporting sustainable growth and maximum employment.
- Odds of another quarter-point rate hike in October rose to 70% from 55% a day earlier, according to CME Group's FedWatch tool, up from less than 10% a month ago.
- A weaker-than-expected Treasury auction of 5-year notes concluded with a yield of 5.033%, far above the six-auction average of 4.186%. Indirect bidders, including global central banks, took 54% of the auction, below the 65% average.
