5-Year Treasury Yield Breaks 5% for First Time Since 2007 as Traders Price Four More Fed Hikes

The US 5-year Treasury yield climbed above 5% on Wednesday, Sept. 23, 2026, for the first time since 2007, as stronger-than-expected economic data drove investors to raise bets on further Federal Reserve rate increases. The benchmark yield jumped 20 basis points to 5.03%, eclipsing its 2023 peak of 4.99%. S&P Global's preliminary September manufacturing and services PMIs both beat expectations, signaling resilient business activity and demand while deepening concerns that inflation will not cool quickly. The data reinforced expectations of tighter Fed policy. The Treasury's 5-year note auction Wednesday drew the highest yield since 2006, reflecting investors' demand for greater compensation to hold intermediate-dated debt. Fed officials unanimously raised rates by a quarter point last week — the first hike since 2023 — lifting the federal funds target range to 3.75%–4.00%. Chair Kevin Warsh said the move withdrew "some of the easing" in policy. Traders now price four more hikes over the next 12 months. Inflation has stayed above the Fed's 2% target for five and a half years. With the labor market still solid, officials warn price pressures may prove more stubborn than expected, keeping upward pressure on yields.