US Treasury Yields Surge to 19-Year High, Pressuring Markets and Mortgages

U.S. Treasury yields jumped on Wednesday, September 23, with the 10-year yield up 11 basis points to 5.08% by midday, a 19-year high , after crossing 5.05% earlier in the session. The 30-year yield climbed above 5.37%, putting it on track for its highest daily settlement since June 2004 . The move is a sell-off in bonds: prices fall as yields rise, and long-duration debt took the brunt.

The trigger was a mix of hot data and inflation worries. September U.S. business activity grew for a fourth straight month at its fastest pace in five years, and traders significantly raised the odds of a second Federal Reserve rate hike at the October meeting . Rising oil prices and tensions around the Strait of Hormuz added to the inflation concerns .

The effects reached the real economy quickly. The average 30-year fixed mortgage rate hit 7.12%, its highest in over two years, and KBH slipped despite an earnings beat after warning of increasingly difficult housing conditions . In equities, every sector except energy traded lower, with basic materials and consumer cyclicals falling the most, and gold fell 1.88% . Cybersecurity was a pocket of strength, with CRWD and PANW rallying .

What to watch: whether the 30-year actually settles above its 2004 high, the October Fed decision, and whether mortgage rates above 7% start to show up in housing data. Higher long-term yields raise financing costs across the economy and pressure rate-sensitive assets from mortgages to growth equities .