What happened

The yield on the 10-year US Treasury note climbed above 5% on Tuesday for the first time since July 2007. Oil prices were a big part of the story, with renewed supply worries pushing crude higher. In turn, this added to inflation pressure just as US headline inflation held at 3.4%. Markets are now pricing in a strong chance the Federal Reserve raises rates on Wednesday, rather than the cut some had long hoped for.

Why it matters

The 10-year Treasury is the reference rate the rest of the financial system prices against. When it rises this fast, the cost of borrowing rises everywhere at once, for governments, companies and households alike. Five percent is also a psychological threshold for investors: at that level, government bonds offer a safe, guaranteed return that starts to rival what many expect from equities. That makes the choice between stocks and bonds more competitive, and it's part of why shares came under pressure: higher yields not only discount future earnings more heavily, they also give investors a credible alternative.

What it means for your investments

It raises the bar for what equities need to deliver to stay attractive, and some investors may rotate part of their allocation toward fixed income. It also means credit is likely to stay expensive for longer. Mortgage rates and corporate refinancing costs will track this move closely. This week's Fed decision, and whether oil keeps climbing, will decide whether 5% is a peak or a new floor.