Just when investors were being lulled into complacency, the rug was pulled out from them. Ten-year Treasury yields have surged by a full percentage point since mid-year to 4.8% this week, the highest level in 16 years. This move has been accompanied by a resurgent U.s. dollar that is now at its high for 2023 and a pullback in the U.S. stock market. Meanwhile, 30-year fixed mortgage rates are hovering around 7.5%, up from 6.9% three months ago.
What is perplexing for investors is the factors causing the spike in yields are not obvious. Most of the run-up has occurred in the last two months when the Federal Reserve kept rates on hold, and investors believe it is near the end of the tightening cycle. Nor has there been a shift in perceptions that inflation is headed lower.
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