U.S. 10-year Treasury yields climbed to their highest level since 2002 on Wednesday, intensifying pressure on equities and reviving concerns that the Federal Reserve may raise interest rates again before the end of the year. The benchmark 10-year yield rose nearly 7 basis points to 5.36%, while the 30-year Treasury yield advanced about 7 basis points to 5.73%, also a 24-year high. The 2-year Treasury yield eased 2 basis points to 4.785%.
The move came ahead of a closely watched $39 billion auction of 10-year notes. Demand at the auction was considered strong, with indirect bidders, including global central banks, taking 80.3% of the notes. The auction yield was around 5.3%, its highest level since 2000.
U.S. stocks closed lower as the rise in long-term yields weighed on risk appetite. The Dow Jones Industrial Average fell 341.41 points, or 0.66%, to 51,179.87. The S&P 500 declined 0.22% to 7,801.77, while the Nasdaq Composite slipped 0.22% to 27,538.69. Bank shares weakened, with Goldman Sachs and Bank of America each falling about 1%. Technology stocks also came under pressure, with CrowdStrike dropping nearly 5%, Palo Alto Networks declining more than 3%, and Meta Platforms falling more than 2%.
Federal Reserve minutes added to the hawkish tone. Most officials considered another increase in the federal funds rate likely to be appropriate by the end of the year, though future decisions would depend on incoming economic data. According to CME's FedWatch tool, markets were pricing in less than a 20% probability of a rate increase at the October meeting, down from 37.6% a week earlier.
Inflation concerns have been reinforced by higher global energy prices, with Brent crude trading around $101 per barrel and briefly moving above $100. The International Energy Agency agreed to speed up the release of oil stocks, with diesel supplies prioritised, helping equities pare some losses. Housing-related stocks also weakened as higher Treasury yields pushed mortgage rates higher, with housing stocks falling 2.3% and homebuilders declining 2.9%.
For the crypto market, the macro backdrop is becoming more restrictive. Rising Treasury yields make low-risk government debt more attractive relative to speculative assets, while the prospect of further Federal Reserve tightening can reduce liquidity available for risk markets. The 10-year Treasury yield has risen roughly 60 basis points since the end of July, reinforcing a risk-off tone across equities and potentially digital assets.
