The current inflationary environment, with the Consumer Price Index rising 8.3% in April, and the Fed’s hawkish stance on increasing rates to combat inflation has been fueling U.S. Treasury yields. Earlier this month, the Fed raised its benchmark interest rate by 50-basis points and indicated that further rate hikes are in the offing.
Furthermore, this month the 10-year Treasury yield note rose to its highest level since November 2018 amid concerns about surging inflationary pressures and slowing economic growth. Higher interest rates and rising yields bode well for insurance companies because they allow them to generate higher returns. These companies generally hold high-quality, long-term bonds to meet their promised returns to policyholders. Thus, higher bond yields should benefit them.
