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The sharp rise this month in U.S. government bond yields is causing tremors in stocks, weighing on hot tech stocks and some other sectors while prompting a more in-depth reassessment of the threat posed by rising interest rates. ‘interest.
For now, many investors remain optimistic because the reasons for the bond pullback are mostly positive. Stuck near historic lows for most of last year, Treasury bill yields have climbed in recent months, alongside investors’ expectations for a strong economic rebound, in part thanks to an increase in government spending financed by the government. debt.
The rise in yields, which results from falling bond prices, often reflects investors’ expectations for faster growth and the accompanying rise in inflation, which erodes the purchasing power of investors. fixed payments of bonds and may eventually lead the Federal Reserve to raise short-term interest rates. An increase in government borrowing can also boost yields by increasing the supply of bonds. While many investors are keeping an eye on inflation data, analysts and portfolio managers say that so far there is little reason to believe that price levels will rise enough to prompt the Fed to raise. rates anytime soon, which appears to be perhaps the biggest risk for major index stocks.
“The market mainly said, ‘Hooray, the pandemic is under control and the economy is starting to grow again,” said Brad McMillan, chief investment officer at Commonwealth Financial Network, an investment advisor and brokerage firm. “But now we’re starting to see the consequences in the form of higher tariffs, and I think the market is dealing with it.”
The benchmark 10-year US Treasury yield on Friday stood at 1.344%, down from just 1.157% five trading sessions earlier and around 0.9% earlier in the year.
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