The U.S. bond market is having one of its worst days in more than a year as the yield on the 10-year Treasury note shot up 0.15 percentage point to 5.11%, its highest level since 2007.

The upshot will be higher borrowing costs throughout the economy if yields don't return to their previous levels. And since bond prices drop when yields rise, anybody that owns Treasuries and other bonds will share in the pain.

Mortgage rates already are heading toward 7%, or even higher, threatening to depress an already weak housing market in many parts of the country.

What happens in coming days isn't clear. Rising energy prices could continue to push Treasury yields up, but interest-rate movements are notoriously hard to predict.

Several factors contributed to the brutal Wednesday selloff.

There was higher-than-expected reading from a September manufacturing purchasing managers survey released earlier Wednesday, which indicates a hotter industrial economy. Oil prices moved higher as benchmark U.S. crude gained almost $2 a barrel to $92.50.

What else depressed bonds? There was weaker-than-expected demand for the Treasury's five-year note auction Wednesday. Federal Reserve Gov. Michael Barr said Wednesday that more rate increases are needed to bring inflation down to the Fed's 2% target. The odds of quarter-percentage-point rate hike by the Fed at its October meeting have risen sharply to almost 70% now, up from 48% a week ago and under 10% a month ago.

There also was defiant talk from Iran's president, Masoud Pezeshkian, at the United Nations, saying his country wouldn't give up its civilian nuclear program.

The bond selloff negatively affected stocks because higher rates-including mortgage rates-are a negative for the economy and make fixed-income investments more appealing relative to equities.

The view on Wall Street was that a move above 5% on the 10-year Treasury would be a psychological negative for stocks and that happened Wednesday.

The S&P 500 index declined 0.8% while the Dow Jones Industrial Average fell 0.7% and the technology-heavy Nasdaq dropped 1.1%. Interest-rate sensitive sectors, not surprisingly, were worst performers, including utilities, real estate and consumer discretionary stocks.