The rise in long-term US interest rates has become a focus of global macro-financial concerns. The nominal yield on the benchmark 10-year Treasury has increased about
70 basis points since the beginning of the year. This reflects in part an improving US economic outlook amid strong fiscal support and the accelerating recovery from the COVID-19 crisis. So an increase would be expected.
But other factors like investors’ concerns about the fiscal position and uncertainty about the economic and policy outlook may also be playing a role and help explain the rapid increase early in the year.
Because US bonds are the basis for fixed-income pricing, and affect almost any security around the world, a rapid and persistent yield increase could result in a repricing of risk and a broader tightening in financial conditions, triggering turbulence in emerging markets and disrupting the ongoing economic recovery. In this blog, we will focus on the key factors driving the Treasury yield to help