What happened: The 10-year Treasury yield (^TNX) climbed as high as 5.04%, its highest level since 2007, before easing on Tuesday. Meanwhile, the 30-year Treasury (^TYX) yield touched 5.39%.

What’s behind the move: The move higher in yields comes ahead of the Federal Reserve’s rate decision on Wednesday. Investors have priced in a 25-basis-point rate hike following the Fed’s FOMC meeting, with a 92% likelihood,

Bond yields remain high as oil prices (BZ=F, CL=F) have firmly moved above $100 a barrel, raising concerns that inflation will remain above the Fed’s 2% target.

“At the same time, investors are insisting on being compensated for high levels of government debt and the ever-rising deficit,” said David Morrison, senior market analyst at TradeNation.

The 10-year Treasury yield is a benchmark for mortgage rates, long-term borrowing and corporate debt. Still, some strategists point to a resilient economy fueled by AI investment and a stock market backed by strong earnings.

“US economic growth is impressive, and bond yields are only back to levels seen before the Great Financial Crisis which was followed by an extraordinary period of financial repression from the Federal Reserve,” said Morrison.

Read more: How soaring Treasury yields could hit your finances

What else you should know: The rise in borrowing costs has been global, with rates in Japan, the UK and Germany also moving higher.

Some strategists note the move may also reflect an unwinding of the yen carry trade, in which investors borrow cheaply in Japan and invest in higher-yielding assets abroad. As Japanese rates rise and the yen strengthens, the trade becomes less attractive.

The move also comes as governments and corporate giants issue debt to help fund spending and build out AI infrastructure, adding to the supply of bonds investors must absorb.

“Even though the rise in bond yields so far this year has been orderly, and it has not happened overnight, these elevated yields could be here to stay for some time,” said Carol Schleif, chief market strategist at BMO Wealth Management.

Ines Ferre is a senior business reporter for Yahoo Finance.

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