Folks, I’m sipping my coffee and reading about the US 30-year Treasury yield rising to 5.45%, its highest level since 2004. I mean, who doesn’t love a good game of economic musical chairs? It seems like the recent sell-off in bonds has yields climbing around the globe, and traders are betting on the Federal Reserve raising interest rates further to tame inflation. Because, you know, that’s exactly what we need – higher interest rates to make our lives more exciting.
The article says that bond yields are on the rise again this week, surging to fresh highs for this year. Thursday’s action follows a bond sell-off Wednesday after new data from S&P Global showed robust US business activity in September but hot inflation from higher energy prices. I guess that’s what happens when you mix a strong economy with a dash of inflation – it’s like a recipe for higher yields.
It’s interesting to note that traders are pricing in a 71% chance the Fed hikes in October, up from 11% one month ago, according to the CME FedWatch forecasting tool. I mean, who doesn’t love a good game of Fed-watch? The key 10-year Treasury yield rose as high as 5.15% Thursday morning, a fresh high for this year and the highest level since 2007. Wow, that’s a big number – I hope my coffee is strong enough to handle it.
Bond yields help set interest rates across the economy, so as yields climb to multi-year highs, it pushes up the cost of borrowing for consumers, businesses, and governments alike. Oil prices rose Thursday, with Brent crude trading around $105 per barrel, adding to inflation pressures and pushing up yields. It’s like a big game of economic dominoes – one thing falls, and everything else follows.
The rise in yields is a global phenomenon, with ten-year yields in France and Germany rising to their highest levels since 2008. Japan’s 10-year yield rose to 3.08%, a level not seen since 1996. I guess that’s what happens when you have a global economy – everything is connected, and when one thing moves, everything else moves with it.
Nigel Green, CEO at deVere Group, said, “Every major bond market’s feeling the heat at once.” I think that’s a great way to put it – it’s like the whole world is feeling the heat, and we’re all just trying to figure out what’s going to happen next.
At the start of the year, some Wall Street analysts expected the Fed to have room to cut rates this year. But the energy shock caused by the war with Iran and a resilient economy have shifted the outlook. The two-year yield, which tracks expectations for Fed policy, has climbed from 3.48% at the start of the year to 4.87% this month. I guess that’s what happens when you have a lot of unexpected events – things don’t always go as planned.
The surge in energy prices caused by the closure of the Strait of Hormuz reignited inflation pressures in economies around the world, leading to a shift in central banks’ outlook toward prioritizing raising rates. It’s like a big game of economic whack-a-mole – every time you think you’ve solved one problem, another one pops up.
In conclusion, it’s been a wild ride in the bond market lately, with yields soaring to multi-year highs. I guess that’s what happens when you have a strong economy, inflation, and a global economy all mixed together. As I finish my coffee, I’m left thinking – what’s next? Will the Fed raise interest rates again? Will the economy keep growing? And will I ever be able to afford a mortgage again? Only time will tell, folks – but one thing’s for sure, it’s going to be an interesting ride. 🙃
Armchair patriot. Believes in the free market, cold beer, and that there’s always a guy named George behind every CNN segment.
Former remote-throwing champion turned #1 couch commentator on liberal panic in the media. Born in Texas (or so his mug says), he earned a degree in Fake Newsology & Beer Philosophy from YouTube University.
⚖️ ENTER THE LEGALIZER
Think the government has no idea what it's doing? Put your case before the Federal Case Terminal and find out.
