The specter of higher interest rates is once again hanging over markets.

US stocks were rattled on Wednesday as bond yields spiked to a new post-Great Financial Crisis peak, signaling investors’ rising rate expectations and their unease in holding government debt amid fiscal uncertainty, geopolitical turmoil, and inflation fears.

The 10-year US Treasury yield, which influences a variety of consumer and corporate lending costs, surged as much as 8 basis points to 5.05%. It marks the yield’s highest level since before the Great Recession. The 2-year yield, which is most sensitive to the outlook for Fed policy, jumped nearly 10 basis points to 4.87%, its highest level in two years.

The 30-year fixed mortgage rate, meanwhile has continued to march higher, rising to 7.12% in the last week, the Mortgage Bankers Association said. It’s the first time rates have breached the 7% mark in two years, and the rate is up nearly one whole percentage point year to date.

The sharp spike in yields on Wednesday appeared to be triggered by hawkish comments from Fed Gov. Michael Barr, who said “further policy adjustments are likely to be needed” in order for the central bank to get inflation back down to its 2% target.

“Moreover, risks to achieving our inflation target have increased, while risks to the labor market have receded,” he added.

US stocks were rattled by the new bond sell-off. Major indexes dipped, with the Nasdaq 100, down more than 1% after hitting a record high on Tuesday.

Here’s where US indexes stood around midday ET:

Chip stocks gave up some gains from earlier in the week week after the sector rallied on news of the breakout success of Meta’s AI agent, Muse.

Here were some of the sector’s notable moves:

Investors are now pricing in a 53% probability that the Fed will hike rates two more times before the end of the year, up from 37% last week, according to the CME FedWatch tool. The scenario reflects a more hawkish monetary policy than what central bankers officially projected in their Summary of Economic Projections, speaking to fears that inflation could run hotter.

Strong manufacturing activity also contributed to the rise in yields on Wednesday, Peter Boockvar, the chief investment officer at One Point BFG Wealth Partners, said. In a note on Substack, he pointed to the S&P Global Manufacturing PMI, which rose further from 53 to 57, indicating that the sector continues to expand.

Price pressures also “intensified” in September due to higher fuel and transport costs, S&P Global said.

Oil prices were also rising on Wednesday. Progress toward a full reopening of the Strait of Hormuz was still uncertain even as President Donald Trump teased deal Tuesday evening following talks with Iran. Previously, he suggested the US could take further military action against the nation, adding to the market’s confusion.

Brent, the international benchmark, rose 2% on Wednesday to $101 a barrel.

Bond yields have garnered attention after spiking past 5%, a key psychological threshold that’s been an obstacle for further stock gains in the past. Mortgage rates at 7% are a similarly important threshold that could further weaken demand from buyers already discouraged by high prices.

Sellers, too, could opt out of the market in favor of sticking with their lower mortgage rate instead of financing a new purchase with the 30-year mortgage hovering near two-year highs.