U.S. economy defies 5% bond yields as consumer spending and business activity surge

What happened

U.S. Treasury rates rose again on Friday, with the 10-year rate hitting its highest level since June 2007 and the 30-year rate moving higher, while the U.S. economy keeps expanding and consumer spending and business activity surge.

Confirmed

Global impact / market context

Higher Treasury yields raise borrowing costs across mortgages, business loans and credit cards, which can slow consumer spending and company investment. Yet the article says spending and business activity are surging despite these higher costs, suggesting the economy is absorbing tighter money conditions for now.

Analyst inference

The 10-year Treasury rate reached a multi-year high last seen in 2007. This matters because Treasury yields set the baseline price for borrowed money throughout the economy, so when they rise this far, stock and bond values are usually pressured.

Analyst inference

What to watch

1. Watch whether the 10-year Treasury rate stays at its highest level since June 2007 and whether the 30-year rate remains elevated, since rising yields pressure borrowing costs. Confirmed
2. Watch whether consumer spending and business activity keep surging even as borrowing costs stay high, because that combination would support continued economic expansion. Proposed
3. Watch whether companies cut capital spending, which means money spent on long-term purchases like equipment and buildings, because higher borrowing costs make such projects more expensive to finance. Analyst inference

Evidence

• cryptopolitan.com