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10-year Treasury yield hits 5%, critical threshold for US economy and markets
The rise in bond yields reached a critical threshold on Monday, with the 10-year Treasury yield hitting 5%, a level briefly touched in 2023 and otherwise not seen since 2007.
The 10-year yieldâs rise to multi-year highs could mean higher costs for Americans who want to buy a home, finance a car or take out other loans.
Bond yields have marched higher this year, pushing up borrowing costs for consumers, businesses and the US government. Yields have climbed despite efforts by Treasury Secretary Scott Bessent to quell concerns in the bond market.
The global bond market, dominated by the almost $32 trillion US Treasury market, has sold off as investors grapple with a mosaic of concerns, from soaring energy prices and expectations for central banks to raise interest rates to uncertainty about the war with Iran and unchecked government spending amid mounting debt.
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Oil and Treasury yields haven’t moved this closely in seven years. That’s bad news for markets
Oil prices and Treasury yields are moving in a tight lockstep, compounding the pressure on markets as investors grapple with worries over higher inflation.
The one-month rolling correlation between front-month West Texas Intermediate crude and the 10-year Treasury yield has climbed to 0.96, according to BMO Capital Markets. That's the strongest positive relationship since June 2019, and before that October 2014.
The synchronized moves come as oil prices have surged due to the conflict in the Middle East, with the benchmark 10-year Treasury yield briefly topping 5% Monday for the first time since October 2023.
The exceedingly tight relationship means another leg higher in oil could increasingly reverberate across financial markets through higher inflation expectations, elevated Treasury yields and steep borrowing costs, while potentially keeping the Federal Reserve monetary policy tighter for longer, said industry veterans.
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