10-Year Yields Hit 19-Year Highs Due to ‘Booming' Economy, Yardeni Says
The bond market is flashing a signal that usually means trouble. Ed Yardeni says this time it mostly means strength. The 10-year Treasury yield closed at 5.11% on Wednesday, its highest level since 2007, and Yardeni Research indicated the main driver is a U.S. economy growing faster than expected. "Today, however, the main reason that bond yields rose sharply is that the U.S. economy is booming," Yardeni said in a note Wednesday. Yet, that strength is now becoming a problem. A Strong Economy Is Becoming A Bond Problem For market veteran Ed Yardeni, the latest bond selloff is increasingly difficult to blame on deficits, oil or foreign investors. The trigger was the flash purchasing managers’ indexes (PMIs) from S&P Global. These surveys ask companies whether business is improving or getting worse. Any reading above 50 signals expansion. The U.S. Composite PMI rose to 58.4 from 56.0, signaling the strongest expansion in business activity since July 2021. Services activity jumped to 58.7, while manufacturing climbed to 57.0. S&P Global said the surveys pointed to roughly 4% annualized economic growth during the third quarter and a 5% pace in September alone. Employment also expanded a
The bond market is flashing a signal that usually means trouble. Ed Yardeni says this time it mostly means strength. S. economy growing faster than expected.
S. economy is booming," Yardeni said in a note Wednesday. Yet, that strength is now becoming a problem. A Strong Economy Is Becoming A Bond Problem For market veteran Ed Yardeni, the latest bond selloff is increasingly difficult to blame on deficits, oil or foreign investors.
The trigger was the flash purchasing managers’ indexes (PMIs) from S&P Global. These surveys ask companies whether business is improving or getting worse. Any reading above 50 signals expansion. S.
0, signaling the strongest expansion in business activity since July 2021. 0. S&P Global said the surveys pointed to roughly 4% annualized economic growth during the third quarter and a 5% pace in September alone. Employment also expanded at its fastest rate in more than four years.
In addition, September factory surveys from the New York and Philadelphia Fed point to a similar jump in the national ISM manufacturing index, due next week. That is good news for corporate demand. It is much less comfortable for the Fed. Real Yields, Not Inflation Fears, Drove Most Of The Rise The 10-year Treasury yield is up 94 basis points in 2026.
Meanwhile, the yield on 10-year Treasury Inflation-Protected Securities (TIPS) is up 84 basis points. TIPS strip out expected inflation, so their yield captures the “real” return investors demand. In simple terms, investors are demanding higher returns mostly because the economy can sustain higher real interest rates. 34%.
5% since 2022. That makes the current bond selloff different from a pure inflation scare. It’s been a selloff driven by real yields which tend to follow growth. 77%, has tracked the New York Fed’s Weekly Economic Index since 2023, according to Yardeni.
Why 5% May Not Be the Ceiling Yardeni had expected the 10-year Treasury yield to remain between 4% and 5% this year. That range has now been breached. " Long-duration bonds are already feeling the pressure. 4%, the highest since 2004.
A relief rally in bonds would likely need one of two things, according to Yardeni. The first is an end to the Middle East war, which would bring oil prices down. The second is action from Treasury Secretary Scott Bessent, such as buying back more long-term bonds and issuing more short-term bills. Photo: Jonathan Weiss/Shutterstock