Short term US Treasury yields reached their highest level since July 2007 last week, after new official data revealed the US economy is still coming in hot, reports Forbes Magazine.
If you want to read the stock market, you need a general understanding of the bond market
The 10 year Treasury yield is directly linked to mortgage rates and borrowing costs for companies
If the 10Y hits 4%, we could see another sell off in stocks pic.twitter.com/mnX4DHrz2H
— GENCO (@gencostocks) February 21, 2023
The benchmark 10-year Treasury yield climbed to 3.87%, while the 2-year rate advanced to 4.669%. The one-year Treasury yields briefly hit 5%. The last time the it hit those levels was July 2007.
High yields affect the price of bonds, which are considered to be the ultimate safe investment. They’ve been sensitive to the new data on the US economy’s health, which isn’t behaving as the Fed expected.
The ten-year Treasury yields, which many use as a benchmark for the economy, hit their highest level since December 30.
Treasury yields are kind of a big deal. They influence how much it costs the US Government to borrow money, how much interest bond investors will get and the interest rates everyone pays on loans.
And the 10-year Treasury yield is the jewel in the crown. It’s used to measure mortgage rates and confidence in the market. If the yields are higher here, it could grind the housing market to even more of a halt.
- Treasury yields hit new highs in February, with 10-year yields hitting 3.86% and two-year reaching 4.6%
- The highs come after data on labor and prices showed the US economy still had a long way to go to get inflation down
- 10-year vs. 2-year bond yields are currently in an inverted curve, which historically has predicted a future recession
An inverted yield curve happens when the shorter-term yields have higher returns than the long-term yields. An inverted curve has historically meant a recession is on the way, and that can be enough to scare off banks from lending.
Investors are worried that stubborn inflation will lead the Federal Reserve to keep raising rates and to keep rates higher for longer — which could tip the economy into a recession.
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