Investors sold off U.S. government debt on Tuesday, pushing the benchmark long term rate to a level not seen in nearly two decades. Nearly 350 S&P 500 companies declined as the selloff intensified ahead of the Federal Reserve's upcoming policy meeting. The 10 year Treasury yield finished the day at 5%, the highest closing since July 2007, after earlier touching 5.04%. This spike was driven by inflation fears and record corporate debt issuance, though Treasury Secretary Bessent attributed the move to global issues.

Traders are awaiting a Federal Reserve policy decision this week, with a rate hike now viewed as nearly certain. Probability of an increase has soared to over 90% following an August Core CPI print of 0.3% and Middle East tensions that pushed crude oil above $106 per barrel. Goldman Sachs and JPMorgan expect the Fed to hike rates, with Goldman forecasting a 0.25% move to avoid market volatility. A sustained move above 5% could pull capital from stocks and further increase borrowing costs for homeowners.