10-year Treasury yield hits highest level since 2007 as market prices in another Fed rate hike

What happened: The 10-year Treasury yield ( ^TNX ) climbed as high as 5.12%, its highest level since 2007, on Wednesday. The 30-year Treasury ( ^TYX ) yield touched 5.37% while the 5-year yield also jumped to a 2007 high as the stock market declined.

What's behind the move: The move higher in yields comes as oil prices rose and business activity data came in hotter than expected, fueling concerns about further Fed rate hikes.

Federal Reserve governor Michael Barr also signaled on Wednesday that additional interest rate hikes are needed to bring down sticky inflation.

Investors raised their bets on another Fed rate hike in October to 70% as Brent ( BZ=F ) crude contracts for November delivery rose to around $100 per barrel. President Trump backed a ban on US diesel exports on Tuesday , adding to concerns about tight fuel supplies and higher energy prices.

Meanwhile, a gauge of manufacturing activity expanded to 57 in September, according to the S&P Global Manufacturing PMI, well above economists' expectations of 53.6.

"We believe the Fed is on track for an additional 25-basis-point rate hike in December," EY-Parthenon chief economist Gregory Daco said on Wednesday, adding the move "could increase the risk of a stock market correction."

What else you should know: Long-dated bond yields have risen this year as investors demand more compensation for the risks of holding government debt.

Corporate borrowing for the build-out of AI has also increased, adding to the supply of bonds competing for investor demand.

Higher bond yields, which move inversely to bond prices, translate into more expensive borrowing costs for households and companies.

The Federal Reserve raised its benchmark interest rate by 25 basis points earlier this month, as inflation has remained firmly above the central bank's 2% target.

Ines Ferre is a senior business reporter for Yahoo Finance.