The yield on the 10-year U.S. Treasury has risen to 5%, marking the first time in nearly three years.

On the eve of this week's Federal Reserve meeting, the U.S. benchmark 10-year Treasury yield rose to the key psychological level of 5% on Monday, marking the first time in nearly three years. The market widely expects the Federal Reserve to raise interest rates to curb inflation. Data from last Friday showed that U.S. consumer prices accelerated in August, which further intensified expectations that the Federal Reserve will hike rates to contain inflation. Tom di Galoma, Managing Director at Mischler Financial Group, stated this “may well be the straw that breaks the camel’s back.” Over the past month, yields have continued to rise due to increasing expectations of rate hikes, growing supply of corporate and government debt, an optimistic economic growth outlook, and concerns over the long-term U.S. fiscal trajectory. Galoma said, “Our budget, deficit, and overall debt structure continue to expand.” Going forward, whether the 10-year Treasury yield can hold above the 5% threshold will be a key litmus test for assessing whether the economy and the stock market can withstand higher interest rates.