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Bond traders seem to think so: the 10-year US Treasury yield exceeded 3.2% on Thursday morning. This is the highest since July 2011. On Wednesday, the 10-year yield has risen more than any other day since the November 2016 presidential election. The 30-year return also exceeded 3.3%, its highest level since October 2014.
Bond yields are rising because of America's strength. In order to control inflation, the Federal Reserve gradually raises its target interest rate, making the loan more expensive. It also adds to the cost of repaying existing debt, which could slow down spending as well as the economy.
Fed Chairman Jerome Powell said in a speech on Wednesday that rates are "far from being neutral". In other words, another rate hike is likely this year and several more could be announced in 2019.
Bond yields around the world also advanced on Thursday, but rising bond yields frightened equity investors. The Dow Jones lost 230 points on Thursday.
A big investor in bonds worries
Bond King Jeff Gundlach, CEO of investment firm Doubleline Capital, told CNN's Julia Chatterley Thursday at the First Move show that higher rates could be problematic, as they could slow down even further. the real estate market. Many types of personal and commercial loans are indexed to the 10-year Treasury yield.
But will the rise in bond yields last? Jeff Mills, Chief Investment Strategist for PNC Financial Services Group, does not think so.
Bond yields rise when prices fall. In essence, returns rise because investors sell bonds.
For him, the rise in yields is due to the growing hope that Italy will manage to control its fiscal problems and the new trade agreement concluded by the United States with Canada and Mexico.
Large investors around the world therefore have less reason to come together for the security of the United States and buy Treasury securities. The flight to quality trading may well end, pushing rates up as investors sell US bonds.
Rates are approaching their maximum?
Many investors were caught off guard when rates suddenly rose, Mills said. Friday's report on US jobs will indicate the strength of the labor market and what that could mean for the pace of future rate hikes by the Fed.
Good numbers of jobs, especially higher wages, could reassure investors that rates are rising for the right reasons: a stronger economy.
As long as worker productivity rises and capital spending rises, higher wages must not lead to rampant inflation, says Mills. That's why he thinks the 10-year yield will eventually settle in a range of about 3.25%.
"The market has to catch its breath and evaluate what's going on," Mills said. "Yes, we will see a gradual increase in borrowing costs as rates rise, but yields are still historically low and rising wages will offset any impact of rising rates on the economy. "
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