The yield on 30-year U.S. government debt hovered around five per cent after breaching the key level for the first time since July at the start of the week — suggesting pressure in the world’s biggestbond marketisn’t letting up.
It’s a threshold that carries special importance, with some viewing it as a “line in the sand” and traders watching for signs it could shift higher. The yield was at 5.01 per cent as of 6:42 a.m. after hitting 5.03 per cent on Monday.
At the heart of the selloff is a fresh bout of concern over inflation and the possibility of fewer interest-rate cuts as oil prices soar with theStrait of Hormuzstill shuttered. A torrent of company spending on artificial intelligence is also raising fears price growth could accelerate in the short term.
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A yield of five per cent or beyond is important because it makes fears about the budget and the growing debt-servicing costs for the U.S. government more urgent. It also has significant implications for other financial markets and the real economy, potentially raising mortgage rates and hurting consumers.
“We’ve seen bonds reprice because the expectation of rates staying higher for longer, or not having as many cuts, has changed, and I think that’s rational,” said Vivek Paul, Global Head of Portfolio Research and U.K. Chief Investment Strategist for the BlackRock Investment Institute, said in an interview on Bloomberg TV.
Economic data before the outbreak of war on Feb. 28 also suggested inflation globally was not slowing as quickly people had expected, while the U.S. economy remains in reasonable health, he added.
Source: Drudge Report
