The US 10-year Treasury yield, which serves as the benchmark for the global bond market, soared to its highest level in 15 years on the 16th (local time). According to the U.S. Treasury Department, the 10-year U.S. Treasury yield closed at 4.28% on the day, the highest since June 2008 based on the closing price. In the minutes of the July Federal Open Market Committee ( FOMC ) meeting released on the day, the Federal Reserve System (Fed) significantly raised government bond yields, suggesting that it would continue tightening monetary policy for a considerable period of time. Former U.S. Treasury Secretary Larry Summers suppressed investor sentiment by warning that the 10-year Treasury yield would rise further to an average of 4.75% over the next 10 years. Treasury yields move inversely to prices.
The 10-year U.S. Treasury yield hit its highest since the global financial crisis. In the July FOMC minutes, “most participants continue to see the risk of rising inflation that could require further tightening,” and “the hawks (currency Austerity preference) remarks hit the market directly.
The fact that the U.S. government is aggressively issuing government bonds amid the possibility of additional tightening has also acted as supply-demand instability, leading to a rise in government bond yields. The fact that the US Treasury Department has announced that it will increase government bond issuance to cover the US fiscal deficit of more than 31.381 trillion US dollars (approximately 4.2 trillion won), and the fact that China and Japan, etc. is analyzed to be pulling down.
Investor sentiment is weakening as corporate financing메이저사이트 costs and individual borrowing costs increase due to soaring government bond yields. The Wall Street Journal ( WSJ ) said, “Investors are nervous because past surges in government bond yields have destabilized the market.” ”he said. “Some analysts believe that Treasury yields are much lower than the Fed’s benchmark rate and that there is ample room for them to rise further,” he said. did.
The WSJ was particularly concerned about the impact of rising bond interest rates on mortgage rates. Because most people are affected. The average interest rate on a 30-year fixed-rate mortgage rose to 7.26 per cent per year from 5 per cent a year ago, and experts believe the rate could rise to 8 per cent per year. The annual rate of 7.2% is already the highest in 22 years since 2001. Lawrence Yun, chief economist at the National Association of Realtors ( NAR ), told Market Watch that “30-year fixed-rate mortgage rates are at an important stage.” will peak, and if that level is easily surpassed, mortgage rates could reach 8% per year.”
July FOMCThe minutes left open the possibility of further rate hikes depending on data such as price and employment indicators to be announced in the future. “Participants emphasized the importance of clearly communicating the Commission’s data-dependent policy approach,” the minutes said. In response, Bloomberg reported, “Federal officials were generally concerned that further rate hikes would be necessary as inflation did not subside.”
The reason the Fed has left open the possibility of further rate hikes is that the Fed’s own outlook for the US economy is improving. The minutes said, “With consumption and real economic indicators appearing stronger than expected, employees no longer judged that the economy would enter a gradual recession toward the end of the year.” It is interpreted that there is a consensus within the Fed that it is not the right time to reverse the monetary policy stance from tightening to easing given the current US economic situation.
The Fed’s hawkish stance was also evident during the July FOMC decision-making process over whether to raise interest rates. According to the minutes, only two of the 18 FOMC members said they could advocate or support a rate freeze in July. As even the proposal to freeze interest rates appears to be only a minority within the Fed, the phenomenon of high interest rates exceeding 5% is expected to continue for some time. According to the Chicago Mercantile Exchange ( CME ) FedWatch , which compiles the market’s base rate forecast, most interest rate futures market participants expect the Fed to maintain the US base rate at the current 5.5% (top) until the first quarter of next year.