Treasury yields breach 5% as Fed opens meeting, AI stocks slide

The yield on the benchmark 10-year U.S. Treasury note breached 5% on Monday for the first time since October 2023, a milestone that rattled markets a day before the Federal Reserve opened its two-day policy meeting.

The 10-year yield touched an intraday high of 5.02% before easing, its highest level since July 2007, according to CNBC. The Treasury Department's own daily par yield curve data put the official constant-maturity reading for the 10-year at 4.97% on Monday, up sharply from 4.83% just a week earlier. Brent crude near $108 a barrel, driven by supply disruption tied to the conflict with Iran, has stoked inflation fears, while traders have sharply raised bets that the Fed will raise rather than cut its benchmark rate this week.

The Federal Open Market Committee convened Tuesday for a two-day meeting that concludes Wednesday with a rate decision, according to the central bank's own meeting calendar. It is the first meeting chaired by Kevin Warsh, sworn in as Fed chair in May after succeeding Jerome Powell. Futures markets have priced in roughly a nine-in-ten probability of a quarter-point increase.

AI stocks hit twice

The bond-market jolt landed alongside a separate rout in AI-linked equities. Nvidia fell 3.36% on Monday, erasing roughly $176.6 billion in market value, while Broadcom dropped 4.77% and AMD slid 4.4%. The selloff followed public warnings from executives at Anthropic, OpenAI and xAI about the risks of rapid AI development and calls for a slower pace of deployment. Rising Treasury yields compound that pressure, since higher long-term rates raise the discount applied to companies' future profits, making high-multiple growth stocks especially vulnerable when yields climb this quickly. The Fed's own daily H.15 selected interest rates release showed the move rippling across shorter maturities as well, with the 2-year yield climbing alongside the 10-year.