The benchmark posts its biggest one-day jump since April 2025 as traders brace for an October hike
The US 10-year Treasury yield rose more than 13 basis points to 5.104 percent on Wednesday, its highest level since July 2007 and its biggest one-day move since April 7, 2025.
CNBC attributed the spike to four factors: stronger-than-expected US activity surveys, hawkish comments from a US Federal Reserve governor, weak demand at a five-year Treasury note auction, and higher oil prices.
The move gained momentum after the yield broke through 5 percent.
The two-year yield, the maturity most sensitive to expected Fed policy, jumped more than 11 basis points to 4.889 percent, its highest since May 2024.
The 30-year gained more than 9 basis points to 5.398 percent, a level last seen in June 2007.
Tony Miano, global investment strategy analyst at Wells Fargo Investment Institute, told CNBC the market is signaling a genuine re-tightening cycle.
He said the Fed's 25 basis point hike last week to 3.75 percent–4 percent was its first increase since 2023, and the dot plot pointed to another hike this year.
Miano told CNBC that positioning had shifted in a week.
He said a week ago, investors could argue for "a one-and-done insurance move" with maybe one more hike in December, but "today's price action says investors no longer believe that."
He said the bond market can't be fooled, and the long end of the curve will stay under pressure unless the Fed gets inflation under control.
S&P Global's flash services PMI rose to 58.7 in September 2026 from 56.5 in August, its highest in nearly five years, while the manufacturing reading reached 56.7, a four-year high.
"US business continues to boom," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement carried by CNBC.
Williamson said that barring the post-lockdown demand spike, the improvement was the strongest recorded since early 2015.
He also said input costs "have meanwhile jumped in September at the steepest rate for four years, with fuel and transport costs spiking higher thanks to the rise in oil prices."
Fed Governor Michael Barr told an audience the same day that "in my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," according to CNBC.
Odds of a quarter-point Fed hike in October rose to 66.4 percent from 55 percent a day earlier, per CME Group's FedWatch tool cited by the same outlet.
A month earlier those odds sat below 10 percent.
The Treasury's five-year note auction cleared at 5.033 percent, against a six-auction average of 4.186 percent, according to BMO figures reported by CNBC.
Indirect bidders, a group that includes global central banks, took 54 percent, below a 65 percent average.
Peter Boockvar, chief investment officer at One Point BFG Wealth Partners, wrote in a Wednesday note quoted by CNBC that it was "a poor auction" as Treasury tried to sell paper into a weak market, with yields not attractive enough to bring in buyers.
He said "the bond bear market continues on."
The S&P 500 fell 0.75 percent to 7,706.03, the Nasdaq Composite lost 1.13 percent to 26,936.04, and the Dow Jones Industrial Average dropped 352.10 points, or 0.68 percent, to 51,511.59.
Utilities and consumer discretionary each shed more than 1 percent.
Massimo Santicchia, head of US equities at Procyon, told CNBC that strong corporate earnings and inflationary pressure have created "a tug of war," with inflation running broader and concentrated in services.
He said the Fed won't pause or cut rates at this point, and predicted two to three more increases.
According to CNBC, Brent crude for November delivery settled 3.86 percent higher at US$103.08 a barrel and West Texas Intermediate gained 1.81 percent to US$92.16.