US 10-Year Treasury Yield Hits 5% Amid Fiscal Crisis
The 10-year US Treasury yield reached its highest level since 2007, driven by inflation, a $40 trillion national debt, and geopolitical conflict with Iran.
The benchmark 10-year US Treasury yield surpassed the critical 5% threshold in September 2026, reaching intraday highs of 5.04%. This milestone, the highest since 2007, was driven by a combination of persistent inflation, a $40 trillion national debt, and soaring energy prices resulting from a conflict with Iran. The surge triggered global volatility, pushing yields higher in Japan, Germany, and France, while increasing US mortgage rates toward 7%.
In response to sticky inflation, Kevin Warsh, Chairman of the Federal Reserve, led a policy shift on September 16, raising the federal funds rate by 25 basis points to a range of 3.75% to 4%. This marked the first rate hike since July 2023. Treasury Secretary Scott Bessent attempted to stabilize the market through expanded bond buybacks, including a $6 billion initiative, though analysts described the impact as muted.
Fiscal concerns have intensified as the Committee for a Responsible Federal Budget reported that interest expenses now consume nearly 20 cents of every government revenue dollar. Jared Bernstein warned that the U.S. is getting closer to a fiscal fire, while other analysts noted that the 5% mark represents a historical inflection point for equity valuations. Despite the volatility, some investors remain optimistic that strong corporate earnings and artificial intelligence development will offset the higher cost of capital.
