10-year US Treasury yield tops 5% for first time since 2007
The run-up in yields on the 10-year Treasury bond, seen as a safe-haven in times of economic uncertainty and a benchmark for borrowing costs around the world, has been driven by investors pricing in stronger U.S. growth as well as fiscal slippage.
Yields at the long-end rose quickly after Federal Reserve Chair Jerome Powell said last week that the U.S.
economy's strength and hot labour market might warrant tighter financial conditions.
The 10-year yield touched 5.004% on Monday, up around 8 basis points (bps) on the day.
It was briefly bid at a 16-year high of 5.001% on Thursday. It has risen 160 basis points since mid-May.
Alongside the Fed's hawkishness, worries over fiscal matters have caused term premiums on the curve to rise.
Treasury borrowing costs have climbed, and a divided Congress has bickered over next year's spending bills while using stopgap measures to avert a shutdown of government operations.
In the background, the Fed is reducing its bond holdings.
In the year to September 2023, the U.S.
government posted a $1.695 trillion budget deficit, a 23% jump from the prior year and the largest since a COVID-fueled $2.78 trillion gap in 2021.
The deficit comes as President Joe Biden is asking Congress for $100 billion in new foreign aid and security spending, including $60 billion for Ukraine and $14 billion for Israel, along with funding for U.S. border security and the Indo-Pacific region.
«It's a major milestone, the fact the entire curve is at or above 5% is remarkable,» said Kyle Rodda, senior financial markets analyst at Capital.com.
«Debate rages about what this means and what's driving the dynamic.
