The yield on a 10-year Treasury reached 5% for the 1st time since 2007. Here's why that matters

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The yield on the 10-year Treasury has reached 5% for the first time since 2007

NEW YORK — The yield on the 10-year Treasury has reached 5% for the first time since 2007. That matters for everyone, not just Wall Street.

Treasury yields have been climbing rapidly, with the 10-year yield rallying from less than 3.50% during the spring and from just 0.50% early in the pandemic. Monday morning, the yield on the 10-year Treasury was at 4.96% after hitting 5.02% earlier. The jump means the U.S. government must pay more to borrow money from investors to cover its spending.

It also directly affects people around the world, because the 10-year Treasury yield is the centerpiece of the global financial system and helps set prices for all kinds of other loans and investments. Besides making it more expensive for U.S. homebuyers to buy a house with a mortgage, higher yields also put downward pressure on prices for everything from stocks to cryptocurrencies. Eventually, they could help cause companies to lay off more workers.

Higher yields mark a sharp turnaround for a generation of consumers and investors who have known pretty much just low yields, as central banks kept benchmark interest rates pinned at nearly zero. Such low rates let people borrow money more easily, which helped economies to strengthen following the 2008 financial crisis, the European debt crisis and other maladies including, most recently, the COVID-19 pandemic.

The low rates led to rising prices for houses, stocks and other investments, but they may also have encouraged too much risk-taking and spurred investment bubbles.

Now, central banks are more concerned with getting high inflation under control. To do that, they raise interest rates and hope the higher