US 10-YEAR TREASURY YIELD HITS HIGHEST SINCE 2007

The yield on the US 10-year Treasury note rose to its highest level since 2007 on Tuesday, CNBC reported. It climbed more than 6 basis points to 5.025%. The yield had briefly crossed 5% on Monday before easing back slightly. The 30-year Treasury bond yield, seen as more sensitive to geopolitical risk, rose more than 5 basis points to 5.384%. The 2-year Treasury note yield climbed about 4 basis points to 4.68%.

The move came as the Federal Reserve began a two-day policy meeting on Tuesday. Markets raised bets on a quarter-point rate rise after August inflation figures stayed above the Fed's 2% target, CNBC reported. Traders priced in a more than 92% chance of a 25-basis-point increase, according to the CME FedWatch tool. Jonathan Liang, chief investment officer of fixed income and foreign exchange at Standard Chartered, said the link between Treasury yields and inflation expectations was likely to persist while inflation stayed elevated. Bloomberg separately reported the yield's rise, linking it to an oil price rally that had strengthened expectations of a Fed rate increase.

Analysts pointed to a tightening relationship between oil and Treasury yields, CNBC reported. BMO Capital Markets calculated that the one-month rolling correlation between front-month West Texas Intermediate crude and the 10-year yield had climbed to 0.96. Steve Sosnick, chief strategist at Interactive Brokers, said higher oil prices tend to lift inflation expectations, and vice versa. Experts told CNBC that if crude prices stayed elevated, the relationship could add further upward pressure on Treasury yields. The Federal Reserve's rate decision was due at the conclusion of its two-day meeting.