Rising oil prices and heavy government borrowing pushed the US 10-year yield to 5.35% and the 30-year above 5.7%, the highest since 2002. IMF Managing Director Kristalina Georgieva said global debt is approaching 100% of GDP and urged governments to cut spending.
US Treasury yields jumped again on Oct. 7. According to Taiwan's United Daily News, the 10-year yield rose nearly 8 basis points (0.08 percentage point) to 5.35%, the highest since April 2002, while the 30-year yield climbed to 5.723%, the highest since May 2002. Major New York stock indexes fell across the board: the Dow lost about 450 points, the S&P 500 fell 0.6%, the Nasdaq 0.9% and the Philadelphia semiconductor index 2.4%.
광고 문의 · 300×250Oil and debt pushing yields up together
The immediate spark was oil. Fears that attacks on Saudi Arabia by Iran-backed Houthis could disrupt crude shipments lifted Brent futures 1.4% to $102 a barrel and West Texas Intermediate to $90.5. Higher oil raised worries about renewed inflation, and bond investors sold long-dated debt, pushing yields up and prices down. The Liberty Times reported that Britain's 30-year gilt yield moved around the 6% level, a 28-year high, and France's 10-year yield reached 4.87%, showing the selloff is not only an American story.
That afternoon the US Treasury was to auction $39 billion of 10-year notes, with about $22 billion of 30-year bonds due on the 8th, testing the market's appetite. The Federal Reserve's September meeting minutes were also due. Investors were expected to look for how officials view prices and growth and whether room for rate cuts remains; details of the minutes will be covered separately once confirmed.
The IMF warning and what the market thinks
Georgieva said in Singapore on Oct. 7 that global debt has grown to near 100% of GDP and that countries should cut spending, the Liberty Times reported, citing CNA and the Financial Times. She added that oil is hovering around $100 a barrel and could rise further as the Northern Hemisphere enters winter. Finance ministers and central bank governors are to take up the issue at the IMF and World Bank annual meetings in Bangkok next week.
Market analysts' diagnoses were similar. Citi's Akshay Singal said France may be just the start, pointing to a global lack of credible fiscal policy, and Keyridge's John Thornton said it is hard to name a ceiling for yields unless oil reverses sharply. Ninety One's John Stopford, however, said that if the selloff continues, the 30-year Treasury near 6% could look like good value.
What it means for ordinary households
Treasury yields are a benchmark for many kinds of loans. In the US the average 30-year fixed mortgage rate rose to 7.49%, a near three-year high, adding to the burden on home buyers. In Korea and Taiwan, when foreign money flows toward safe, high-yielding US bonds, local currencies tend to weaken and market rates to rise, so households with floating-rate mortgages, and overseas Chinese families who manage assets in dollars, should check their exchange-rate and interest exposure.
Higher yields are also an opportunity for people who hold deposits and bonds. Experts say the path of oil prices and governments' fiscal responses will decide where rates go from here. With stock-market volatility likely to rise for now, borrowing to invest calls for caution.
