The 10-year U.S. Treasury yield has broken through the “psychologically important” level of 3 percent, leaving analysts contemplating what it could mean the future of asset markets and, more importantly, the global economy.
The yield on the benchmark bond — which helps to set prices for debt instruments all over the world — inched past 3 percent Tuesday, a level that many market players deem dangerous for investments and the economy.
With yields rising — which move inversely to a bond’s price —market participants are expecting higher interest rates from central banks. And as a result of these higher interest rates, companies will have higher costs when borrowing money and will have less room to increase salaries, to invest, and to give returns to shareholders — making equities less attractive. As the 10-year note is used to set mortgage rates, then it can also reduce people’s ability to spend.