10-year Treasury yield reaches highest level since 2002, pushing up loan costs

The yield on the 10-year Treasury note rose to as much as 5.34% during Thursday’s trading, the highest level recorded since 2002, before easing later in the session. The increase reflects broader market pressures, including geopolitical tensions, expanding federal deficits, tighter monetary policy and heightened competition from corporate debt issuances linked to AI investments.

Brian Therien, a senior analyst at Edward Jones, said the rise could "increase borrowing costs for households and businesses" and may slow interest-rate-sensitive sectors such as housing and auto sales, even as the labor market remains solid. He noted that adjustable-rate debt, including credit cards, home-equity lines of credit and adjustable-rate mortgages, is likely to feel the most immediate impact because those products are tied closely to short-term benchmark rates.

Therien added that consumers seeking new loans should expect higher rates and larger payments, while savers and fixed-income investors could benefit from more attractive yields on high-yield savings accounts, money-market funds, CDs and bonds. He said higher starting yields can improve the return potential of bonds, shifting expected returns toward interest income rather than price appreciation.

Peter C. Earle, senior director of research at the American Institute for Economic Research, warned that higher long-term yields raise financing costs for businesses and put pressure on stock and existing bond prices. He said investors buying Treasurys can secure higher yields, which may help generate income without taking on corporate credit risk, but cautioned that the benefit to purchasing power depends on inflation and tax considerations, and that Treasury bonds can lose market value if yields rise further before maturity.