US bond market crisis intensifies as long-term yields surge above 5%

The US bond market is experiencing an intensifying crisis as long-term Treasury yields, particularly the 30-year yield, have surged above 5%, with the 10-year yield nearing 4.5%. This selloff is attributed to persistent inflation proving more resilient than expected, leading to revised market expectations of a "higher for longer" interest rate environment, potentially delaying or reducing future rate cuts. Economist Ed Yardeni suggests the market is pricing in higher inflation and a Federal Reserve that might need to tighten further. Additionally, the ballooning US fiscal deficit and increased Treasury issuance are adding supply to a market with waning demand, creating a feedback loop of higher yields and increased borrowing costs. This rise in yields is impacting the mortgage market, pushing borrowing costs higher and contributing to an inventory drought in housing. For stock investors, higher yields make equities less attractive by increasing the risk premium required. For fixed-income investors, while existing bond values fall, new investments offer the highest yields in years, though the ultimate outcome depends on future inflation levels. Investors are advised to monitor inflation data and Treasury auction results, as continued deterioration could see the 5% yield level become a floor rather than a ceiling.

(Source：Crypto Briefing)