US financial conditions tightened sharply on Wednesday after S&P Global reported much stronger-than-expected September business activity, sending the 10-year Treasury yield above 5% for the first time since July 2007.
The benchmark 10-year yield climbed to 5.135%, its biggest one-day jump since April 7, 2025. The two-year yield, more sensitive to Federal Reserve policy, rose to 4.947%—the highest since May 2024—while the 30-year yield added more than 10 basis points to reach 5.415%, a level last seen in mid-2007. The selloff came as the S&P 500 fell about 0.5% and the Nasdaq Composite dropped roughly 1% in morning trading.
S&P Global’s flash US composite purchasing managers’ index rose to 58.4 in September from 56.0 in August, the highest reading since July 2021. The services PMI climbed to 58.7 from 56.5, a nearly five-year high, while the manufacturing PMI reached 56.7, the strongest in more than four years. S&P Global Market Intelligence chief business economist Chris Williamson said US business activity was experiencing a significant growth surge across both manufacturing and services. He also noted that input costs increased at their fastest pace in four years, with fuel and transport costs rising alongside higher oil prices.
The stronger data added to expectations that the Federal Reserve may keep monetary policy tighter for longer. The central bank had already raised its target rate by a quarter percentage point to 3.75%–4% on September 16. On Wednesday, traders raised the probability of another quarter-point increase in October to 70%, up from 55% a day earlier, according to the CME Group’s FedWatch tool. Federal Reserve Governor Michael Barr added to the pressure, saying: “In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.”
Treasury bonds came under additional strain after the Treasury Department’s $70 billion five-year note auction drew weaker demand than expected. The notes sold at a yield of 5.033%, above the 5.002% expected before the auction. Indirect bidders accounted for 54% of the sale, below the six-auction average of 65%. Oil prices reinforced inflation concerns: Brent crude rose more than 4% to above $103 a barrel, and US crude gained more than 2% to $92.55 as the US-Iran conflict continued. The move came ahead of a $6 billion Treasury buyback operation targeting debt maturing in 20 to 30 years scheduled for Thursday.
For crypto markets, the fresh jump in benchmark borrowing costs may reinforce a risk-off backdrop. Digital assets were not mentioned in the reports, but higher risk-free yields tend to make risk assets less attractive and can pressure valuations across the crypto complex.
