Investors Fret as Daunting Bond Market Milestone Comes Into View

One of the most important interest rates in the world this week flirted with a level it hadn’t reached in more than 16 years, putting pressure on the economy and the stock market.

The 10-year Treasury yield, a measure of how much it costs the U.S. government to borrow that is widely used as a benchmark for all types of lending, brushed against 5 percent for the first time since mid-2007 before ending the week around 4.9 percent.

The steep rise in the 10-year yield in recent months has captured the attention of investors, economists and policymakers. This “sudden, rapid increase” has shaken faith in the continued resilience of the economy, said economists at the rating agency Moody’s, threatening “to knock the U.S. economic expansion off course.”

The Federal Reserve controls short-term interest rates, which ripple through the economy via market-based rates like Treasury yields and to borrowing costs on longer-term debt like mortgages and company bonds.

But unlike the gradual, deliberate changes to rates enacted by the Fed, moves in longer-term market rates, like the 10-year Treasury yield, are less predictable and subject to many factors. These moves are very important to the economy, and they can alter the behavior of consumers and companies faced with suddenly higher borrowing costs.

As the 10-year yield has risen, the rally that propelled the S&P 500 higher earlier in the year has stalled, with the benchmark stock market index ending the week down 2.4 percent.

The 10-year Treasury yield also influences important consumer rates: The average 30-year mortgage has recently approached 8 percent and credit card rates are now above 20 percent.

Borrowing costs around the world also tend to rise along with Treasury yields. The effect has been particularly pronounced for emerging market economies, which have to contend with a double whammy of higher yields and a strengthening U.S. dollar, making debt payments more expensive for countries with dollar-denominated debt.

Jerome H. Powell, the Fed chair, recently noted the rapid rise in market rates and the potential effect it could have on the economy, including the central bank’s decision whether to raise its key rate again or keep it steady.

“A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little,” he said on Thursday.