A benchmark at a multi-year high
The yield on the 10-year US Treasury note is back above 5 percent, a level it had not touched since late 2023 and had reached only once before that since 2007. The move matters because the 10-year yield sets the price of borrowing for mortgages, corporate bonds and government budgets around the world.
The yield has risen by roughly 80 basis points since January, when it traded near 4.15 percent. The 30-year bond yield is near 5.3 percent, and shorter maturities have moved up as well, reflecting bets that policy rates will stay high for longer.
War, oil and inflation
Two forces are pushing yields up. First, the war with Iran and the blockade of the Strait of Hormuz have kept oil prices close to $100 a barrel, feeding inflation through transport, food and manufacturing costs. Second, the Federal Reserve raised interest rates this month for the first time since 2023, and traders expect more tightening if price growth stays hot.
Government borrowing adds to the pressure. The US national debt crossed $40 trillion last month, and the government has paid about $1.27 trillion in interest this fiscal year — money that competes with everything else in the budget.
Households feel it first
Higher yields reach consumers quickly. Mortgage rates track long bonds, and credit card costs follow short-term rates. Surveys show the mood is sour: US consumer sentiment slipped to a four-month low in September, with households pointing to petrol prices and inflation.
Business investment is one bright spot. Orders for key US-made capital goods rose more than expected in August, helped by spending on data centres and other computing infrastructure. Investors are watching whether that spending can offset weaker household demand while the Fed keeps policy tight.