As U.S. bond yields hit their highest level in nearly 20 years, markets increase bets on further Fed rate hikes. U.S. bond markets faced strong selling pressure on September 23, pushing the 5-year Treasury yield above 5% for the first time since 2007. The 10-year yield briefly reached 5.13%, also the highest level since before the global financial crisis, while the 30-year yield neared 5.4%. The upward pressure on yields came from stronger-than-expected U.S. economic data, rising oil prices, and particularly a weak demand for the $70 billion auction of 5-year Treasuries. The auction closed at a yield of 5.033%, about 31 basis points higher than pre-auction market expectations, with a bid-to-cover ratio of only 2.21x. Interest rate markets now fully price in approximately three additional 25-basis-point hikes from the Fed over the next year, with growing hedging activity anticipating a potential fourth hike. This indicates a significant shift in monetary policy expectations toward tighter conditions following the Fed’s recent rate hike in September. The sharp rise in yields also pressured risk assets: the S&P 500 fell about 0.8%, while the Nasdaq lost over 1%, as yields above 5% made U.S. Treasuries more attractive than stocks and crypto in attracting capital flows.