Highest yields since 2007
The U.S. Treasury yields are the interest rates that the U.S. government pays to borrow money. The 10-year and 30-year Treasury yields are the most widely followed indicators of the long-term health of the U.S. economy and the expectations of inflation and growth.
10 year yield at 4.80%
According to the latest data, the 10-year Treasury yield surged to 4.80% on Tuesday, 3rd October 2023, which is the highest level since 12th October 2007.
30 year yield at 4.79
The 30-year Treasury yield rose to 4.79% on Monday, 2nd October 2023, which is the highest since 6th April 2010.
The main reasons for the rise in the Treasury yields
The strong U.S. economic data that showed that the labour market remains hot and the manufacturing sector rebounded in September 2023.
The Federal Reserve’s ‘higher for longer’ mantra signalled that the central bank would keep raising rates until inflation is under control.
The reduced demand for safe-haven assets as the U.S. government averted a shutdown over the weekend by passing a short-term stopgap funding measure.
Uncertainty at the heart of the U.S. political system.
The implications of higher Treasury yields
The higher borrowing costs could weigh on the economic growth and consumer spending in the future.
Higher inflation expectations could erode the purchasing power of the fixed-income investors and increase the risk of a bond market sell-off.
The higher interest rate differential could attract more foreign capital inflows into the U.S. dollar and strengthen its value against other currencies.
The Fed makes and ‘unmakes’ the economy!
Remember… the Fed said inflation was transitory.
Why?
How could they get it so wrong?