10-year Treasury yield hits 5%, critical threshold for US economy and markets

The rise in bond yields reached a critical threshold on Monday, with the 10-year Treasury yield hitting 5%, a level briefly touched in 2023 and otherwise not seen since 2007.

The 10-year yield's rise to multi-year highs could mean higher costs for Americans who want to buy a home, finance a car or take out other loans.

Bond yields have marched higher this year, pushing up borrowing costs for consumers, businesses and the US government. Yields have climbed despite efforts by Treasury Secretary Scott Bessent to quell concerns in the bond market.

The global bond market, dominated by the almost $32 trillion US Treasury market, has sold off as investors grapple with a mosaic of concerns, from soaring energy prices and expectations for central banks to raise interest rates to uncertainty about the war with Iran and unchecked government spending amid mounting debt.

Yields on government bonds across the globe have touched multi-year and multi-decade highs this year, raising the cost of borrowing money. It's compounding concerns about affordability, adding to unease about governments' enormous debt burdens and threatening to weigh on the stock market.

Yields rise when bond prices falls. The bond market sell-off this year has pushed prices lower and sent the 10-year yield toward levels not seen in nearly two decades. The 10-year yield is now at its highest level since October 2023 and just a whisker away from its highest level since 2007, which was the last time the 10-year yield rose firmly above 5%.

The 10-year yield entered the year trading at 4.15%, and dipped below 4% in February. After the start of the war with Iran, yields sharply reversed course and started climbing – and they've yet to stop. The 10-year yield hit 4.5% in May before hitting 5% on Monday.

After hitting 5% on Monday morning, the 10-year yield pulled back and traded just below that threshold, still at its highest level since October 2023.

Higher bond yields translate into higher interest rates, making borrowing money more expensive.

The 10-year yield is the benchmark for borrowing costs across the economy. Rising yields can push up the interest rates people pay on their mortgages and other loans.

The housing market is where higher yields can really sting. Mortgage rates closely track the 10-year Treasury yield. As the 10-year yield has surged this year, the average 30-year mortgage rate has climbed to its highest level in more than a year.

The rise in yields has sent mortgage rates climbing. The average 30-year fixed mortgage rate rose to 6.76% last week, up from 6.15% at the start of the year.