U.S. 10-year Treasury yield tops 5% again as Fed’s Warsh spotlights inflation risk

U.S. Treasury yields on Wednesday turned higher across most of the curve, as a bond rally that initially kept going after the Federal Reserve’s widely expected interest rate hike gave way to a sell-off following comments from Fed Chair Kevin Warsh.

“The plain fact is that inflation is too high and has been for too long,” Warsh told reporters at a press conference following the Federal Open Market Committee’s (FOMC) decision to raise the federal funds rate to 3.75%-4.00% from 3.50%-3.75%.

Traders also focused on hawkish signals from the Fed’s new Summary of Economic Projections (SEP), which showed a median federal funds rate of of 4.1% at the end of 2026, implying at least one more hike this year.

Moreover, the dot plot showed that at least 12 members of the FOMC now see one more rate hike this year, while four penciled in two more hikes. Two members see no more hikes. Additionally, the median projection for core PCE inflation to return to the Fed’s 2% target was pushed out to 2029 from 2028.

The benchmark U.S. 10-year yield was now up 1.4 basis points to 5.010%, crossing the 5% mark for a second straight day and hovering near its highest level since April 2007.

The shorter-end, more rate-sensitive 2-year yield surged 5.6 basis points to 4.719%, a day after hitting its highest since mid-2024.

$113 crude and Treasury buybacks anchor bond market 

The underlying pressure on fixed-income bourses continues to stem from the compounding Middle East energy crisis. Brent crude holding firm past $113 a barrel – amplified by Saudi pipeline strikes and ongoing Red Sea transit bottlenecks – has severely complicated central bank inflation targets from Washington to Frankfurt.

The temporary breather in yields on Wednesday also follows soft regional economic metrics, including a contraction in New York manufacturing data that spurred fresh concerns over the broader economic outlook, alongside tactical dip-buying following weeks of heavy duration liquidations.

Meanwhile, Treasury Secretary Scott Bessent defended the administration’s fiscal posture before Congress, acknowledging that while rising yields are driven by global macroeconomic strains, Washington must address its expanding fiscal deficit.

Despite the Treasury doubling its long-term debt buyback operations to stem duration pressure, fixed-income desks note that persistent supply shocks and central bank hawkishness continue to overpower federal market interventions.