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Why the 5% Treasury Yield is Scary in 4 Points

Treasury bond yields at the level have jumped to their highest level since 2007, bringing more turbulence to markets and investor sentiment.
Specifically, the 10-year Treasury yield – which moves inversely to the price – briefly touched 5% late Thursday, a level last seen in 2007.
Expectations that the Federal Reserve will hold rates high interest rates and growing fiscal concerns in the United States are among the factors driving the jump.
The consequences were not long in coming, considering that the $25 trillion Treasury bond market is considered the foundation of the global financial system.
The S&P 500 has fallen about 7% from its highs for the year, as the promise of guaranteed returns on U.S.
government debt lures investors away from stocks.
Mortgage rates, meanwhile, are at their highest levels in over 20 years, weighing on property prices.
Of note, volatility in U.S.
stocks and bonds has exploded in recent weeks as expectations about Fed policy have changed.
Predictions of a surge in government deficit spending and debt issuance to cover that spending have also unnerved investors.
The jump in US Treasury bond yields is scary: all the risks for world finance in 4 points.
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Shares Reuters analysts have highlighted in a concise analysis what can be expected on the markets if the ten-year US Treasury yields 5%.
Higher Treasury yields can curb investors' appetite for stocks and other risky assets, while also tightening financial conditions as they raise the cost of credit for businesses and individuals.
For example, with investors gravitating towards Treasuries, where some maturities currently offer well over 5% to investors who hold the bonds to maturity, high-dividend stocks in sectors such as utilities and the real estate were among the hardest hit.
Also worth highlighting is Tesla's plunge, in its worst performance of the year.
Elon Musk warned that high interest rates could weaken demand for electric vehicles, which sent stocks in the sector tumbling on Thursday.
Dollar The US dollar has advanced about 6.4% on average against other G10 currencies since the rise in Treasury yields accelerated in mid-July.
The dollar index, which measures the dollar's strength against six major currencies, is near an 11-month high.
A stronger greenback helps tighten financial conditions and can hurt the balance sheets of U.S.
exporters and multinationals.
Globally, this complicates other central banks' efforts to contain inflation by pushing their currencies lower.
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Mortgages The interest rate on the thirty-year fixed rate mortgage – the most popular real estate loan in the United States – has risen to the highest levels since 2000, damaging consumer confidence homebuilders and putting pressure on mortgage applications.
In an otherwise resilient economy characterized by a strong job market and robust consumer spending, the housing market has stood out as the sector hardest hit by the Fed's aggressive actions to cool demand and reduce inflation.
Existing home sales in the United States fell to a 13-year low in September.
Credit Spreads As Treasury yields have risen, credit market spreads have widened with investors demanding a higher yield on riskier assets such as corporate bonds.
Credit spreads exploded this year after the banking crisis, only to narrow in the following months.
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