The 10-year T-note yield on Wednesday climbed to 4.880%, the highest in 16 years. The 10-year yield has risen by more than 65 bp this past month and more than 80 bp since the start of the year. Yields are higher on the Fed’s hawkish indications that interest rates will be higher for longer. Yields are also climbing on concern that rising U.S. budget deficits will increase the amount of securities the Treasury must sell to finance the burgeoning deficits. T-note yields are also higher on concern that rising oil and gasoline prices will worsen the inflation picture.
The surge in bond yields has sparked concern about another financial market blowup that caused the collapse of Silicon Valley Bank and a meltdown in regional banks in March. The higher yields also threaten to undercut the economy as rising borrowing costs threaten to dampen consumer spending and capital spending by companies. Federated Hermes said, “Ultimately, the feedback effect starts to fuel fears that you’re going to have a hard landing.”
