The 30-year U.S. Treasury bond hit its highest yield in nearly two decades on May 19 as concerns about inflation permeate financial markets.
At about 5.2%, the yield on the 30-year was the highest since 2007. Bond yields — interest rates — rise when prices fall, and vice versa.
Traders and investors have been selling bonds of all durations because the fixed income streams they offer become less valuable as prices rise throughout the economy. Inflation has surged since the start of the Iran war, pushing up prices for energy and goods that need to be transported.
What Rising Bond Yields Mean for Your Money
The big jump doesn’t mean anything directly for consumers, said Steve Blitz, chief U.S. economist at GlobalData. Mortgage rates are priced off the 10-year note, because most mortgages are held for only about six or seven years. Credit cards and other similar products use short-term rates.
Blitz expects long-term investors like pension funds to start to gravitate toward the 30-year if yields remain elevated, in order to lock in those higher returns for their account holders. But that means they’ll sell stocks to free up money, he noted.
U.S. stocks have been under pressure over the past few days as yields have risen, for other reasons. Higher borrowing costs weigh on some of the fast-growing companies that dominate the stock market. But governments at all levels, from local parks districts to the U.S. Treasury, will also have to pay more, at a cost to taxpayers.
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