US Treasury yields hit their highest level since 2007, topping 5% on the 10-year, sending home mortgage rates to more than 7%. The rout stems from ballooning government deficits, worsening tensions between the US and Iran, skyrocketing oil prices, hawkish commentary out of the Federal Reserve and steepening inflation data — all of which culminated in weak demand for an auction of US five-year notes on Wednesday, surprising trading desks across Wall Street.
“When interest rates go up, interest payments go up, and that suffocates the government’s ability to do anything, including to help people with the high cost of living,” said IMF head Kristalina Georgieva at Semafor’s The Next 3 Billion event this week. “So we should prepare for people being more unhappy, more, in many places, on the street.”
The higher yields could become a boon to some private credit lenders like Apollo or Blackstone: Direct lenders tend to benefit from volatility in other markets, offering a steady helping hand when others retreat. There’s certainly no shortage of companies in need of cash.
