The yield on the 10-year US Treasury bond exceeded 5%, reaching a level not seen since the financial crisis of 2007. This situation is due to expectations of a long period of high-interest rates and concerns about inflation. US Federal Reserve Chairman Jerome Powell warned that returning inflation to his 2% target will take time and that there will be bumps in the road. The US economy appears healthy, with recent data showing growth in retail sales and inflation. Investors are adapting to the reality of higher interest rates, and they are expected to remain above 5% until the end of 2024.
The 10-year US Treasury bond experienced an increase in its profits, reaching levels not seen since the great financial crisis of 2007. This Monday, the ten-year bond yield exceeded the 5% threshold, an important number for investors and analysts.
The rise in 10-year bond yields is due to expectations of a long period of high-interest rates. US Federal Reserve Chairman Jerome Powell recently noted that the process of returning inflation to the 2% target will take time and that there will be roadblocks. Powell warned of the dangers of doing too little or too much with monetary policy, which could harm the economy and inflation.
Despite rising interest rates, the US economy is showing signs of strength. The latest data revealed an increase in retail sales, with a growth of 0.7% in September compared to the previous month. In addition, the year-on-year inflation rate remained at 3.7% in August and September, indicating that prices remained stable.
Investors are beginning to adjust to the fact that there will be a longer period of higher interest rates. According to projections from the US Federal Reserve Board, the interest rate is expected to remain above 5% until the end of 2024. This situation has implications for the global economy, with similar effects expected in Europe and China, as well as consumer spending and investment, which declined due to rising interest rates.
The secondary debt market in Europe was also affected by the expectation of high-interest rates. In the case of the German bond, the profit is close to the 3% threshold, while in the case of the Spanish bond, the profit exceeds 4%, and in the case of Italy, it reaches 4.936%.