Wall Street is increasingly treating 5% U.S. Treasury yields as a new normal, and possibly even a floor. According to Sina Finance, the move comes as Treasury yields keep breaking higher, with multiple forces pushing up U.S. borrowing costs, including $100-a-barrel oil, an artificial intelligence investment boom, and a record $40 trillion debt load driven by a large budget deficit.

The article said U.S. benchmark Treasury yields are now hovering around 5% or higher, while the 5-year yield rose above 5% on Wednesday for the first time since 2007. Vanguard portfolio manager Samuel Martinez said the market has entered a new environment, while New York Mellon chief economist and macro strategist Vincent Reinhart said the earlier low-rate years were the abnormal period.

The report also noted that the rise in yields is affecting consumers, companies, and governments, and could slow the economy and pressure U.S. stocks. It added that the average yield on the U.S. Treasury market has climbed to 5.05%, near the 2023 peak of 5.12% and close to the highs seen in 2006 and 2007.

U.S. Treasury Secretary Scott Bessent has tried to curb long-term yields through more buybacks, but the market has largely viewed the effort as ineffective. The article said traders are now fully pricing in three 25-basis-point Fed rate hikes over the next year, with a fourth hike also being hedged.