“Why Treasury yields keep rising, causing pain for stock-market investors”
August 18, 2023
“…The benchmark 10-year yield BX:TMUBMUSD10Y finished at its highest close since Nov. 7, 2007, at 4.307%, while the 30-year rate BX:TMUBMUSD30Y ended at 4.411% or its highest since April 28, 2011. The 30-year rate has jumped 87.3 basis points since April, while its 10-year counterpart has soared more than a full percentage point since then.
Conventional wisdom is that rising long-term yields tend to reflect a combination of greater optimism about U.S. economic strength, the prospects for future inflation, and investors’ demands to be compensated for the risk of those future price gains. This time around, inflation expectations are still elevated, but easing, and there’s a bit more going on…
In a nutshell, 10- and 30-year Treasury yields are a reflection of where the bond market sees the U.S. economy heading over the long term. They’re now capturing the likelihood of a higher-for-longer fed-funds rate, plus higher real yields, while unwinding the risk of an imminent recession, strategists said…”