US 10-Year Treasury Yield Nears 5% as Markets Brace for FOMC Super Week
The US 10-year Treasury yield approached the psychologically significant 5% threshold. On a closing basis it hit 4.998%, the highest level in roughly three years, since October 2023. By the time of the broadcast, the yield had already crossed 5.01% in Asian trading, while the 20-year yield surged to 5.407%.
The rise in yields has a clear cause. As CPI, PPI, and other inflation gauges turned higher again, the probability of a Fed rate hike in September, per the CME FedWatch tool, climbed to 92%. The hosts noted that at this probability level, markets would actually be surprised by a hold rather than a hike.
Park Sidong assessed that a rate hike at this Thursday's (September 18) FOMC meeting is effectively a foregone conclusion, with the real question being the Fed's messaging afterward. In his view, if left unchecked, Treasury yields could climb as high as 5.5%, but markets can absorb levels up to around 5%; once yields reach 5.5%, concerns shift toward consecutive hikes.
He also noted that if Japan, the UK, the eurozone, and other major economies move toward rate hikes in sequence, global Treasury yields could simultaneously stabilize. Still, he flagged a dense calendar of remaining variables for the second half of the year — Middle East tensions, third-quarter earnings season in October, the October 28 FOMC meeting, the November 3 US midterm elections, and the December 9 FOMC meeting — meaning the market will need to weather a Fed blackout period through October.
The market currently expects the Fed to raise the terminal rate to 4.5%–4.75% by the first half of next year, reflecting roughly three to four additional hikes ahead, the hosts explained. They added that this is merely a projection subject to change depending on shifts in oil prices and inflation data.