The US five-year yield rose to the highest level since 2007 after hotter-than-anticipated inflation data in Canada and rising oil prices added to global concerns about resurgent price pressures.The five-year Treasury yield rose as much as 5.5 basis points to 4.5044%, exceeding its 2022 high and climbing to the highest since August 2007. Other Treasury tenors approached their 2023 highs, with the 10-year coming within a basis point of its Aug. 22 peak of 4.36%.The climb in the five-year yield above 4.5% reflected the bond market recognizing that the Federal Reserve will be keeping policy higher for an extended period, according to Gregory Peters at PGIM Fixed Income.”The market is finally coming to a realization, after fighting the last 18 months, that rates are indeed higher and we are not going back to a pre-pandemic type level,” the co-chief investment officer said on Bloomberg TV. He added that investors should watch where the Fed sets its peak rate for this cycle in order “to get a better understanding of whether they believe terminal rates are higher.”A more than 1% increase in the futures price of crude oil to the highest level since November underscored inflation pressure in the US economy.The jump in US yields comes as the Fed begins a two-day meeting Tuesday at which it’s expected to leave rates unchanged. Still, traders are pricing in about even odds of another increase by year-end, which would be the 12th hike since March 2022 in its battle to curb inflation.Investors are also keenly focused on Fed officials updated quarterly rate projections – known as the dot plot – that will be released Wednesday at the conclusion of the policy meeting. High on the watchlist will be whether these forecasts continue to reveal a median view for one more quarter-point hike this year and whether projections for 2024 scale back the 100 basis points of rate reductions that officials foresaw in June.The rise on oil prices also works as an effective additional tax on consumers and will likely complicate the Fed’s decision ahead as to whether they need to pause or continue to raise rates, PGIM’s Peters said.