The 10-year U.S. Treasury yield touched 5% on Monday, reaching multiyear highs, as surging oil prices, escalating Middle East instability, and anticipated Federal Reserve interest rate decisions spooked Wall Street and pressured artificial intelligence stocks.
Financial markets experienced a volatile session on Monday as investors contended with a convergence of macroeconomic pressures. The 10-year U.S. Treasury note yield briefly crossed the psychologically critical 5% threshold before pulling back, reaching intraday levels not recorded since October 2023. At the same time, major stock indices retreated following sharp declines in artificial intelligence and technology shares, while crude oil prices climbed past $105 a barrel amid supply disruptions in the Middle East.
Treasury Yields Hit 5% Threshold as Bond Market Feels the Pressure
The benchmark 10-year U.S. Treasury yield climbed to 5.012% in morning trading, according to Tradeweb data cited by the Wall Street Journal, marking its highest intraday level since 2007. Although the yield later drifted down to about 4.96%, the movement underscored persistent investor anxiety over inflation and heavy government borrowing.
According to CNBC’s market reporting, the benchmark rate — which directly influences mortgages, auto loans, and credit card debt — was last down 2 basis points at 4.955%. Meanwhile, the 2-year Treasury note yield fell less than 2 basis points to 4.626%, and the longer-dated 30-year Treasury bond yield dipped to 5.328%.
Market strategists point to a multifaceted supply-demand imbalance driving the upward movement in yields. Enormous debt issuance from both the federal government and corporations is competing heavily for available investor capital. Furthermore, surging crude oil prices have added fresh fuel to inflation expectations just as the Federal Reserve prepares for its upcoming policy meeting.
“Hiking would be the cleaner decision based on the data and current market expectations,” said Jay Woods, chief market strategist at Freedom Capital Markets. “I believe the market has priced that in and may rally with a hike. No change may cause a negative market reaction as it screams once again the Fed is behind the curve.”
Jay Woods, chief market strategist at Freedom Capital Markets
According to the CME Group FedWatch tool cited by CNBC, traders are pricing in a 90% probability that the Federal Reserve will raise interest rates by a quarter percentage point. Pepperstone analyst Chris Weston put those expectations even higher, noting a 92% probability of a hike, with 50 basis points of cumulative tightening assumed by year-end.
Tech Shares and Artificial Intelligence Giants Slip on Growth Warnings
While the bond market wrestled with rising yields, Wall Street equity indices suffered broad-based losses driven by weakness in the technology sector. The S&P 500 finished the session down 0.5%, while the Nasdaq pared early losses to trade down about 0.1% amid specific pressures on semiconductor and AI infrastructure providers.
Chip stocks fell roughly 5%, with notable drops hitting companies such as Nvidia, AMD, and CoreWeave. The downturn followed cautious commentary from prominent technology executives. Anthropic CEO Dario Amodei advocated for a coordinated slowdown in artificial intelligence development to better understand potential risks, a statement that drew support from other industry figures but sparked sharp pushback from political leaders.
President Donald Trump dismissed concerns that artificial intelligence could pose existential threats, calling them a hoax and emphasizing the urgent need for the United States to win a technological race
against China.
Even so, financial analysts warned that collective caution from tech leaders carries heavy weight for the broader financial landscape. Adam Sarhan of 50 Park Investments noted that the AI trade has been the engine of both the economy and of the stock market over the last several years. The sudden friction has forced investors to reassess the speed, scale and monetisation timeline of the sector’s capital expenditure boom, according to Patrick Munnelly, a market strategist at Tickmill Group.
Oil Price Surges and Geopolitical Headwinds Add to Inflation Fears
Adding to the day’s economic anxieties, crude oil prices jumped sharply after drone attacks led Saudi Arabia to shut down a key oil pipeline. Brent crude approached $110 a barrel before settling up about 1% at $105.68 a barrel.
The energy supply disruption deepened concerns about sustained inflation, which has remained well above the central bank’s stated 2% target. Briefing.com analysts pointed to some geopolitical optimism later in the session, noting that oil prices moderated slightly after remarks indicated openness to dialogue between the United States and Iran.
Treasury Secretary Scott Bessent has attempted to ease pressure on the long end of the yield curve through an expanded bond buyback program. However, strategists at BMO Capital Markets cautioned that while active buyback efforts can help limit selling pressure, they fail to address the prevailing fundamental drivers of the upward pressure on 10- and 30-year yields.
All eyes now turn to the Federal Reserve’s policy announcement on Wednesday, where central bank leaders are widely expected to raise interest rates amidst a complex backdrop of fiscal deficits, geopolitical tensions, and shifting technology valuations.