The yield on the 30-year U.S. Treasury reached 5.19% on Tuesday, its highest point since July 2007, as investors continued selling government bonds. The yield on the 10-year Treasury jumped to 4.69%, its highest level since January 2025, before falling to 4.60% on Wednesday.

Investors have been selling Treasurys in recent weeks, pushing prices lower and yields higher. Treasury yields move with investor demand and expectations for inflation, economic growth and Federal Reserve policy. In April, inflation rose at its fastest pace in almost three years, driven by surging oil and gas prices.

Financial markets see little chance that the Federal Reserve will cut interest rates in 2026, and the probability of a rate hike this year has increased, according to CME FedWatch. When the Federal Reserve raises interest rates, the price of existing Treasury bonds decreases because newly issued bonds become more attractive with higher yields. Inflation often leads the Federal Reserve to raise interest rates to stabilize prices.

Treasurys, or bonds issued by the U.S. government, are considered among the safest investments in the world, and the bond market serves as an early warning system for a range of risks, including fiscal concerns and recessions. Higher Treasury yields influence mortgage rates, corporate borrowing costs and the relative appeal of stocks. The average rate on a 30-year mortgage was 6.36% on Wednesday, up from 5.98% at the end of February, according to Freddie Mac.

The shift in yields has changed the calculus for investors weighing bonds against stocks. "As yields rise, investors have alternatives to equities that did not exist to the same degree during the ultra-low-rate era. That naturally places pressure on highly valued sectors," said Nigel Green, CEO of deVere Group.

The bond selloff may reflect investor concerns about near-term inflation rather than fears of stagflation, a combination of slow economic growth and high inflation, according to Yardeni Research. "Our current assessment is that the bull market isn't at risk of being derailed by the selloff in the bond market, which presents a very good opportunity to buy both bonds and stocks," the firm said. "We will start to worry if the 10-year yield significantly breaches 5.00%."