The financial markets have been shaken by a significant selloff in the largest bond market globally, happening just as the year kicked off. This has caused quite a stir among investors across various financial sectors. Over the past week, we’ve witnessed U.S. Treasury yields surge, bringing the rate on the 10-year note incredibly close to the 5% threshold—levels we haven’t really seen much of since the time of the global financial crisis.
While the 10-year yield approaching 5% isn’t exactly new—we’ve seen it hover near this mark in recent years—it seems to be drawing a lot more attention this time around. So, what’s behind the heightened interest?
Nicholas Colas, who co-founded DataTrek Research, provides some insight: “The market’s getting jittery about the 5% benchmark on the 10-year yield because it represents the upper edge of what an entire generation has come to know about interest rates over the past two decades,” he notes. “We last crossed the 5% boundary in the middle of 2007, and we all remember the aftermath of that.”
Colas goes on to point out that while 2025 stands apart from 2007 in many ways—there’s greater stability within the banking sector today, yet we’re dealing with higher levels of U.S. Federal debt—market narratives often cling to straightforward, familiar figures like the 10-year Treasury yields. He elaborated on these thoughts in a note sent to clients on Monday.
