Why the bond market is freaking out, and what it means for your money

Investors are increasingly nervous about rising inflation, which could require the Federal Reserve to hike interest rates. The bond market is flashing red. The yield on the 30-year Treasury note reached 5.44% on Wednesday, its highest level since 2004, before slipping slightly on Thursday morning. The 10-year Treasury, which influences mortgage rates, briefly neared 5.15% on Thursday morning, a level it last reached in 2001. Yields had already risen amid concerns about inflation and growing U.S. debt. They jumped further on Wednesday after stronger-than-expected economic data led investors to price in additional interest-rate hikes as the Federal Reserve battles inflation. Several members of the central bank's Federal Open Market Committee (FOMC), which sets rates, also signaled this week that they favor further increases.

Wall Street analysts said investors are increasingly concerned about a protracted conflict in the Middle East, with the U.S. and Iran exchanging fresh threats at this week's United Nations General Assembly in New York. Prolonged tensions could keep oil prices elevated, stoking inflation and increasing pressure on the Fed to raise its benchmark interest rate, economists said. On top of that, weak demand for a 5-year Treasury note auction on Wednesday forced the U.S. government to dangle higher yields to attract buyers. Bond yields and prices move in opposite directions, with rising yields signaling that investors are