10-year Treasury yield climbs to 5% for the first time since 2023

What happened: The 10-year Treasury yield ( ^TNX ) climbed past the 5% threshold on Monday for the first time since October 2023. Meanwhile, the 30-year Treasury ( ^TYX ) yield hovered at 5.38%.

What's behind the move: Bond yields continued their ascent as Brent crude climbed to $108 a barrel, stoking inflation fears and leading investors to price in rate hikes ahead of the Federal Reserve's policy meeting this week.

Goldman Sachs revised its forecast for this week from no change to a rate hike following Friday's August inflation print .

"The report had little impact on our inflation view but pushed market pricing of a hike to nearly 90%, high enough that the FOMC will likely want to avoid the market reaction that would likely follow from remaining on hold," Goldman Sachs' chief economist David Mericle wrote on Sunday night.

Some strategists believe long-dated bond yields may ease if the Fed hikes rates at its Sept. 15-16 meeting.

"A move this week would help restore the Fed's inflation-fighting credibility and might ease some of the upward pressure on long-term yields," veteran strategist Ed Yardeni wrote in a note on Sunday.

Polymarket bettors have raised the probability of a September rate hike to 80%.

What else you should know: The rise in yields is not limited to the US, with 10-year yields in Australia and the UK both above 5%.

"Either development would normally be enough to break a global bull market in stocks. Neither has so far," Yardeni said. "That's because corporate earnings keep climbing."

The move in global yields may also reflect an unwinding of the yen carry trade, in which investors borrow cheaply in Japan and invest in higher-yielding assets abroad. As Japanese rates rise and the yen strengthens, the trade becomes less attractive.

"That unwinding might partly explain the global bond market selloff," Yardeni wrote.

The move higher in yields also comes as governments and corporate giants issue debt to help fund spending and build out AI infrastructure, adding to the supply of bonds investors must absorb.

Ines Ferre is a senior business reporter for Yahoo Finance.