US Bond Yields Continue to Rise on Interest Rate Concerns

October 23, 2023: US bond yields continued to rise on October 23, 2023, as investors prepared for the Federal Reserve to raise interest rates next week. The yield on the 10-year Treasury note rose to 4.0%, its highest level since 2008.

Bond yields are increasing in anticipation that the Fed will raise interest rates by 0.75 percentage points at its meeting next week. This would be the third consecutive 0.75 percentage point hike, bringing the Fed’s benchmark interest rate from 3.75% to 4.0%.

The Fed is raising interest rates to combat high inflation. Inflation in the US is currently at a 40-year high, and the Fed is concerned that it could remain elevated for longer.

Higher interest rates typically lead to lower bond prices. This is because investors can buy new bonds with higher yields, which makes older bonds with lower yields less attractive.

The rise in bond yields is bad news for homeowners and businesses looking to borrow money. Higher interest rates will make it more expensive to borrow money, which could slow economic growth.

Analysis:

The rise in bond yields is a sign that investors are becoming more concerned about the outlook for the US economy. Investors are worried that the Fed’s aggressive interest rate hikes could push the economy into a recession.

The Fed is facing a tricky balancing act. It is trying to raise interest rates high enough to combat inflation but also trying to avoid causing a recession. It remains to be seen whether the Fed will be able to achieve a soft landing.