It’s a brand new week but the bond market is still not giving broader markets much room to breathe.
Treasury yields are once again pushing higher again today, with the 30-year yields touching 5.70% – their highest since 2002. Meanwhile, 10-year yields are nudging up to around 5.32% and closing in on levels not seen in over two decades as well.
When you look at the chart, the direction of travel is rather clear. 30-year yields have powered through the 5.40% area since the final week of September and are continuing to stretch higher.
I would argue that the bigger takeaway here isn’t that yields have reached another multi-decade high. At this juncture, it is more about what the move is telling us about the sort of market landscape that investors are being forced to price in.
In other words, that is where the idea of “higher for longer” in the bond market starts to matter beyond what the Fed does on monetary policy.
So long as investors continue to demand higher yields to own long-term government debt, then borrowing costs can stay elevated even without another rate hike from the Fed.
And the pressure here is also continuing to cause reverberations across broader markets still.
Gold is down another 1% today to $4,117 after failing to gather enough conviction to push through $4,200 last week. And while stocks have shown much resilience so far, every step higher in Treasury yields will raise the hurdle rate for equities in the grand scheme of things.
And in looking at the big picture, we’re still dealing with the same question of how high do yields need to go before something starts to break?
That is something that is now becoming more and more difficult to ignore with yields pushing above 5% across much of the curve and the 30-year now close enough to 6% for markets to start talking about it seriously.
This article was written by Justin Low at investinglive.com.