Bond vigilantes stir as US 30-year yields climb to their highest mark since 2007
Higher US yields shrink how much American buyers can borrow for a given monthly payment and discourage homeowners holding low-rate mortgages from moving, Reuters reported.
Banks, insurers, and pension funds face a separate channel, per the outlet, because a fast rise erodes the market value of existing long-dated holdings, and institutions forced to sell before maturity lock in losses.
“The bond market is actually finally working the way it should work. It’s allocating capital efficiently,” Ed Yardeni, head of Yardeni Associates, said in a CNBC interview about the US market.
Yardeni said the American bond market is testing the outer limits of where bond vigilantes start protesting, though US yields would not be at current levels if the economy were not performing.
“You are on a bus called the 30-year bond and there is a cliff coming, but you don’t know if it is 100 metres away or 100 miles away,” Matt Eagan, a portfolio manager at Loomis Sayles, told the New York Times.
