U.S. Treasury Yields Approach 3%

The yield on the U.S. 10-year note climbed to 2.99 for the first time since 2014.

In response to rising treasury yields, the dollar rallied at the start of the week.

Tension over trade between the U.S. and China appears to have ebbed.  Treasury Secretary Steve Mnuchin said he’s “cautiously optimistic” on reaching an agreement.  Furthermore, North Korea pledged to dial back its nuclear ambitions.  As a result, bond traders breathed a sigh of relief.

But they must now come to terms with a deepening government bond selloff that has implications for everything from company borrowing costs and the strength of the dollar to investor allocations.

Even so, there is some concern that rising Treasury yields will dampen interest in stocks.  Cresset Wealth’s Jack Ablin predicts leaping Treasury yields are here to stay.

“I think there’s still a lot to go.”  “[The] 10-Year yield has been below fair value for nearly ten years.”  This has been due in large part to central bank bond purchasing that’s been going on.

“If you take a look long-term, where the 10-Year typically trades, it matches nominal [economic growth].” “And, the last nominal [growth] number we got in December of last year suggested that the 10-Year Treasury should be about 4.1 [percent] not 2.9.”

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