10-Year Yield Breaks 5% Into the FOMC: What's Priced and What Isn't

The 10-year Treasury yield broke above 5% for the first time since October 2023, hitting 5.03% on September 15, according to TradingEconomics and FRED's DGS10 series. The move caps a repricing that now has markets pricing roughly an 85% probability of a 25 basis point hike to 3.75%-4.00% at the September 16 FOMC decision, per CME FedWatch.

The repricing came from inflation, not from fresh Fed messaging. August core CPI rose 0.3% on the month against a 0.2% consensus, matching the pattern the bureau calls one-directional, while headline CPI ran 3.4% year over year, per the U.S. Bureau of Labor Statistics release of September 11. Context on the run-up to that print is in Yields Spike 11 Basis Points as Markets Await CPI Print. Producer prices confirm the pipeline pressure: August PPI rose 5.4% year over year, with energy up 4.2% on the month and diesel up 24.1%, as Brent crude trades near $107 a barrel on conflict-driven supply shock.

What is priced is the hike itself. The odds climbed from about 44% on August 7 to roughly 60% by September 8, then to the mid-80s after the core-CPI beat, and FedWatch now reports 86% to 90% with Polymarket close behind. We map how that pricing built up in The Fed's Hawkish Pivot: What the September FOMC Priced In. Goldman Sachs reversed its no-hike call and EY-Parthenon projects an increase, so a 25bp move to 3.75%-4.00% is the consensus base case.

The open question is what follows the decision. The hike is largely in the price, which puts the real event risk in the Summary of Economic Projections, the dot plot, and Chair Warsh's press conference. Fed policy framework coverage: a hawkish read could push the 10-year further above 5%, while guidance that leaves room for later easing could let yields and risk assets rally despite the move itself. Into the decision the market leans defensive, with SPY down 0.45% and QQQ down 0.80% on September 15, per Yahoo Finance data. The decision-day setup is laid out in Week Ahead: FOMC Decision, Retail Sales Take Center Stage.

The one-line read: this is a meeting priced for the hike, so the signal to watch is not the decision but the dots, and whether the energy shock buys the Fed room in either direction. This content is for informational purposes only and does not constitute financial advice.