Tags: Bond | Yields | Economic | Inflation

Rising Bond Yields Stoke Economic, Inflation Fears

Tuesday, 20 Mar 2012 10:15 AM

Bond yields are on the rise, a sign that while the economy is mending, fears that inflation will strike the country are growing.

The yield on the benchmark 10-year Treasury bond has quickly shot to five-month highs, hitting 2.375 percent on Monday — its highest level since late October, Fox Business Network reports.

Rising yields signify falling prices on bonds and often indicate investors are ditching government debt to look for more rewarding assets like stocks on anticipation that the economy is growing and inflation is rising.

"The backup in the 10-year U.S. Treasury bond yield since late February certainly reflects mounting confidence in the strength and sustainability of economic growth," Ed Yardeni, president and chief investment strategist at Yardeni Research, writes in a note, Fox Business Network reports.

However, rising yields could also bring up interest rates on credit bound to the 10-year Treasury, namely mortgages, which could dampen tepid economic growth.

Housing remains a hurdle to U.S. recovery.

"Everything is pretty fragile right now. Everyone is pretty concerned that if you have a rapid rise in yields, you run the risk of at best slowing things down," says Dan Greenhaus, chief global strategist at BTIG, Fox Business Network adds.

Other experts point out that yields could drift higher.

"The momentum is with the (bond) bears. We could see yields go up a little more from here," says Jeff Given, portfolio manager at Manulife Asset Management in Boston, which manages about $208 billion in assets globally, according to Reuters.


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2012-15-20
Tuesday, 20 Mar 2012 10:15 AM
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