Why a key borrowing rate is above 4% again

A key borrowing rate for American consumers has jumped to a level not seen in months.

The yield on the benchmark 10-year US Treasury note breached 4% on Monday for the first time since August. The yield reached as high as 4.029% during the day, according to Tradeweb.

That is extending a jump in the 10-year yield last week after a blowout September jobs report on Friday led investors to recalibrate their expectations for how much the Federal Reserve will cut rates this year.

Since the stronger-than-expected report, traders have raised their bets that the Fed will ease rates by a quarter point in November and December, according to the CME FedWatch Tool. The 10-year yield closed at 3.98% on Friday, up from 3.85% on Thursday.

Higher-for-longer rates are likely to put pressure both on companies and everyday Americans. The 10-year yield tracks the rate on everything from mortgages to student loans to car loans, leaving consumers looking to borrow for big-ticket purchases with elevated costs.

“With investors growing more confident in an outlook in which job creation continues, growth remains robust and inflation moderates more slowly, the Fed is now seen easing policy at a more gradual pace than expected only a week ago,” wrote Karl Schamotta, chief market strategist at Corpay Cross-Border Solutions, in a Monday note.

Data out this week could provide hints on where the Fed will take rates this year. Investors will parse the Consumer Price Index report for September and wholesale inflation figures. While inflation has cooled enough that the Fed has turned its attention to maximizing employment, some investors worry that a still-hot jobs report could make it more difficult to bring inflation down to the Fed’s 2% target.