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USA 10-year bond yield hits highest since 2014

26 April, 2018, 00:46 | Author: Sara Gill
  • NEW YORK | US stocks dip and bond yields set four-year highs

Gold has responded more favorably today due to the fact that lower prices are tempting investors back into the market.

But Charles Peabody, a partner at research firm Portales Partners LLC, in Chatham, New Jersey, said high rates could dampen credit and take a toll on banks as soon as this year.

"2018 may present a different picture...."

Gold prices gained after three days of losses on Tuesday as the dollar retreated from an earlier three-month peak and US equities weakened, even as benchmark US Treasury yields passed 3 percent for the first time in more than four years.

Now, on April 23, the market closed with the yield at 2.975 percent, while the high of the day was 2.996 percent.

There's another reason stocks react to the bond market. Accordingly, investors need to get ready for rising Treasury yields to hit the stock market.

For now, investors are shrugging off the news, too. So to offset a current rise in interest rates investors demand more future money. So even if you have the second safest possible investment, it still needs to offer a higher rate of return than a Treasury note.

The 10-year U.S. Treasury yield has broken through the "psychologically important" level of 3%, leaving analysts contemplating what it could mean the future of asset markets and, more importantly, the global economy. "That has narrowed the gap between the two yields...."

Both bond and stock funds have drawn interest from investors this year.

Rising interest rates pose several problems for stocks in particular.

"Our sense is that in coming quarters we see the dollar strengthen against most of the majors and for USA real rates to continue rising", he writes. "S. debt more attractive than bonds from other countries".

"The market's attention is rotating to other things, and one of those things is rising inflation and rising yields", Mr. The five-year yield increased from 28 basis points to 53 basis points, and the ten-year yield rose from 51 basis points to 76 basis points.

That tax cut came to fruition in December, and it supercharged corporate profits, but that was a one-time event.

Federal Reserve actions have very little influence on the yield on TIPS.

Despite the disappointing outlooks, US corporate earnings have gotten off to the strong start that was widely anticipated, with the expected growth rate for the quarter now at 21.1 percent, according to Thomson Reuters data. "If rates rise quickly from here, I think that's a headwind for stocks and for the economy".

Also, the rising yields are negatively impacting equity sentiment as United States markets extend their retreat. If bond yields surge, so do mortgage rates.

Historically, the yield on the 10-year TIPS has been less than the actual growth rate of the economy.

As growth outside the U.S. decelerates (while USA growth remains strong), bond yields are starting to have an influence on riskier investments. S. economy since the end of the Great Recession, which is 2.2 percent. An advancing greenback tends to weigh on commodity prices, and the jump in West Texas Intermediate prices has been the key driver of the advance in breakeven inflation rates.



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