U.S. Treasury Yields Climb Ahead of Critical Fed Policy Decision

U.S. Treasury yields surged as investors positioned for the Federal Reserve’s upcoming policy decision, with the 10-year note yield jumping to 4.72%—its highest level since early October. The increase in the US10Y benchmark followed a broader rise across the yield curve, with the two-year note yield climbing to 4.45%. Market participants are closely monitoring the Fed’s stance on interest rates, with expectations of a pause in rate cuts amid persistent inflation pressures. The rally in yields has significant implications for rate-sensitive sectors, particularly financials, real estate, and utilities. Higher borrowing costs are weighing on mortgage demand and could dampen home construction activity. In the equity markets, the S&P 500 (SPX) dipped 0.6% as rising yields eroded the appeal of high-growth and dividend-paying stocks, which are more vulnerable to discount rate increases. The U.S. Dollar Index (DXY) rose to 105.3, reflecting increased demand for dollar-denominated assets as yields rise. This strengthening currency may further complicate export competitiveness and could impact multinational earnings. The bond market’s reaction underscores a shift in sentiment: the market now prices in a 68% probability of no rate change at the December meeting, up from 55% just two days prior. Investors are now awaiting the Fed’s statement and Chair Jerome Powell’s post-meeting press conference for clearer guidance on the inflation outlook and the path of future rate cuts.