The U.S. 10-year Treasury yield climbed to 5.35% on Wednesday, Oct. 7, its highest level since 2002, triggering a broad stock-market retreat before strong demand at a $39 billion bond auction eased pressure.
The surge in yields reflected renewed selling across global government-bond markets, as investors demanded greater compensation for inflation, rising energy costs and heavy public borrowing. The 30-year Treasury yield also reached a 24-year high near 5.73%, increasing concerns about mortgage rates and corporate financing costs. Higher bond yields can make stocks less attractive by raising the return available from relatively safer government debt and increasing the cost of borrowing for companies.
After reaching the day’s peak, the 10-year yield pulled back toward 5.27% following the Treasury’s auction. Indirect bidders, including overseas investors and central banks, bought 80.3% of the notes, well above the recent average, while dealers purchased only 2.5%. The Dow Jones Industrial Average fell 341 points, or 0.6%, while the S&P 500 and Nasdaq Composite each lost about 0.2%.
The Russell 2000, which tracks smaller companies, dropped 1.3%, showing that rate-sensitive shares suffered the most. Investors also assessed Federal Reserve meeting minutes indicating that officials generally expected another interest-rate increase before the end of the year.