The broad U.S. stock markets are modestly higher than the last time we published a Market Update two weeks ago. Meanwhile, bond yields have advanced higher too. Bond yields have arguably been more interesting to watch than the stock market lately.
The benchmark 10-year U.S. Treasury yield, which helps set borrowing costs on everything from mortgages to corporate loans, ended Friday at 1.93%. It was its highest close since December 2019. (The yield has risen almost 28% just year-to-date, going from 1.512% on December 31 to 1.93% on Friday.) A strong report on the U.S. labor market boosted investors’ expectations that central banks will begin steadily raising interest rates to fight inflation.
Bond price changes (another way of saying yield changes because yields move inversely to prices) have implications that sweep across practically all capital markets. Not all bonds respond the same to changing economic conditions, but the trend is pointing towards higher yields generally. We will keep watching this space as we build and manage investment strategies.