The 10-year Treasury yield crosses 5% as the Fed meets

The yield on the 10-year U.S. Treasury note traded through 5% on Monday for the first time since October 2023 and pushed higher again on Tuesday, touching about 5.04%, a print some desks compared with 2007. The 30-year yield moved near 5.38%. The two-year sat around 4.68%. Bond prices fall when yields rise; the move is a vote that inflation from oil and the Iran war will not fade on its own.

Brent crude was near $107 a barrel and West Texas Intermediate near $103 after Saudi Arabia shut its East-West pipeline and the Houthis launched fresh attacks. August consumer prices accelerated. Employers added 162,000 jobs in the latest month. CME FedWatch put the chance of a 25-basis-point increase at the 15–16 September meeting in the low nineties. A hike would lift the federal funds target from 3.50–3.75% to 3.75–4.00%, the first rise since July 2023.

Chair Kevin Warsh, appointed by President Donald Trump, has said little about the path. Trump wants lower rates. More than 90% of futures traders have been pricing the opposite. If Warsh votes against a majority hike he would be the first modern chair to dissent from his own committee. Goldman Sachs and UBS brought a September increase onto their official calendars after the inflation print.

Oil, AI, and a 5% line

Monday’s first print above 5% faded back to about 4.95% by the close. Tuesday morning put the level back on the board. Strategists have treated 5% as a test of whether long-term buyers still exist at that price. If the note holds below it, demand is still there. If it stays through, the long end can keep selling.

The dollar index rose above 99. Stock-index futures slipped. AI shares were already under pressure after an essay by Anthropic’s Dario Amodei on safety and pace. Rising long yields raise the cost of the data-centre build that those shares are priced on. Japan’s 10-year yield reached 3% ahead of a Bank of Japan meeting where a move to 1.25% is expected.

The Federal Open Market Committee decision and the updated dot plot are due at 2 p.m. Eastern on Wednesday. Markets will read the dots for a second hike this year as closely as they read the statement. Warsh has argued that AI-led productivity can let the economy grow without as much inflation. The 10-year at 5% is the market saying it wants to see that argument survive $107 oil.