The yield on the benchmark 10-year Treasury bond in the U.S. has risen above 5% and reached its highest level since July 2007.
The 10-year yield reached 5.004% in early trading today (Oct. 23), up eight basis points in the past 24 hours.
The yield on the 10-year Treasury has risen 160 basis points since mid-May of this year and is now at its highest level in 16 years.
The rise in the 10-year Treasury yield comes amid a steep selloff in the bond market. Bond yields move inversely to prices.
Bond traders have been selling the government debt instruments at the same time as the U.S. Federal Reserve has been flooding the market with new issues as it unwinds its holdings.
The U.S. Federal Reserve is reducing its bond holdings after buying Treasuries aggressively during the Covid-19 pandemic to help support the economy.
The rise in bond yields is putting stocks under pressure as the higher yield presents an attractive alternative to equities and is enticing investors to shift capital.
Yields on all U.S. dated bonds have been rising since Oct. 19 when Federal Reserve Chair Jerome Powell said that a strong U.S. economy and tight labour market might require the central bank to further raise interest rates.
The yield on the two-year U.S. Treasury is up four basis points to 5.125%, while the 30-year Treasury yield is up eight basis points to 5.164%.
At the same time, the U.S. government posted a $1.695 trillion U.S. budget deficit for the current fiscal year, a 23% increase from the previous fiscal year.
Last week, U.S. President Joe Biden asked Congress for an additional $100 billion U.S. in foreign aid to assist Ukraine and Israel.
