U.S. Treasury yields fell on Thursday, reversing some of the recent gains that had pushed long-term interest rates to levels not seen in decades.
The 10-year Treasury yield last breached levels recorded in April 2002 and has since fallen 5 basis points to 5.243%. The 10-year period affects interest rates on mortgages, car loans, and credit card debt. The yield on the 30-year US Treasury note also fell by more than 2 basis points to 5.613%, after hitting a 24-year high.
Yields and prices move in opposite directions. 1 basis point equals 0.01%.
Jeff Kilberg, CEO of KKM Financial, said he expects the 10-year bond yield to return to around 4.5% to 4.75% if the U.S. and Iran reach an agreement to end the war. “If we continue to stay in Iran, that will be a problem for the 10-year bond yield.”
Government borrowing costs around the world continued to rise relentlessly on Thursday, continuing a trend for months as inflation remained stubbornly above target and major central banks moved to raise interest rates while investors balked at a lack of political will to tackle budget deficits.
The Institute of International Finance said last week that major economies faced “continued high deficits and rising interest payments, challenges that have long been associated with debt-stricken emerging sovereign economies.”
Japan’s decade Yields have reached their highest levels since the mid-1990s. Japan’s debt is under pressure due to the weak yen and the Bank of Japan’s interest rate hikes.
yield of Germany’s decade German federal debt, a benchmark for the eurozone, rose above 3.6%, the highest level since 2008, but has since fallen. Elsewhere in Europe, France 10 years It rose 8 basis points to 4.925%. Italy’s decade rose 10 basis points to 4.706%. Britain’s decade The yield rose 5 basis points to 5.483%.
“It’s worth noting, but people get pretty excited about these spreads on a regular basis, so I don’t think it’s necessarily a crisis point when it comes to Germany versus France or Italy,” said Michael Schumacher, a former managing director at Wells Fargo. “When you look at some countries with very poor structural dynamics, like the UK, I would be concerned about that. Normally people don’t trade gold and government bonds that much, but as a barometer of market concerns, for example, I think it’s a country to watch.”
The U.S.-Israel war with Iran has disrupted oil exports from the Middle East, and bonds have been pegged to oil prices. Oil prices rose on Thursday, with international benchmark Brent crude futures above $100 a barrel.
“You could effectively see (bond) buyers come in to take advantage of these yields, which could result in lower yields, but one of the things that’s keeping yields moving over the long term of the curve is what’s happening with oil, what’s happening with inflation,” Nomi Prins, founder of Princites Global, said Thursday on CNBC’s “Squawk Box Europe.”
But Prince said it was unlikely that sovereign wealth funds and central banks, the main long-term holders of government bonds, would respond.
Prince added that in the Middle East, “if oil prices fall significantly and there is a resolution, we could see a move towards lower U.S. bond yields.”
— With additional reporting by CNBC’s Jeff Cox
