2-year Treasury yield rises, tops 5% as traders fret over the potential for more Fed rate hikes

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Treasury yields rose Wednesday, as fears over more Federal Reserve rate hikes led investors to sell short-duration U.S. debt.

The 2-year Treasury yield climbed 6 basis points to trade at 5.027%. The benchmark 10-year Treasury yield jumped nearly 3 basis points to 4.296%.

Yields and prices have an inverted relationship. One basis point equals 0.01%.

The rise in yields came as data released Wednesday raised concern over the potential for additional rate hikes. The ISM Services index for August came in at 54.5, above a Dow Jones consensus forecast of 52.5. That marks the eighth straight month of expansion for the services sector.

"This is certainly not good news for a data dependent Fed, as the immediate reaction in the Treasury market saw the ten-year Treasury yield jump higher while equities remain under pressure," said Quincy Krosby, LPL Financial's chief global strategist. "With oil and food prices also higher, this report points to a Fed whose job to quell inflation is certainly not yet quite finished."

Traders also parsed through the latest central bank Beige Book, which suggested that the U.S. economy experienced modest growth during July and August, and slowing price growth.

Earlier in the day, Boston Fed President Susan Collins said the central bank can "proceed cautiously" on more rate hikes, but noted that "further tightening would be warranted" if the recent improvement in inflation data proves to be fleeting.

Wall Street continued keeping an eye on rising oil prices, which some investors and analysts have come to interpret as a potential sign that inflationary pressures may continue for longer and impact the Fed's next upcoming interest rate decisions.

Markets are widely expecting the Fed to keep rates unchanged when it next meets later this month, but the picture is less clear for the remainder of the year.

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