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The yield on the 10-year U.S. Treasury recently climbed above 5%, its highest level in more than two decades. Expectations for higher interest rates, federal borrowing and demand for financing AI investments are putting the bond market in focus. CNBC's Matt Peterson and Liz Napolitano explain why Treasury yields are rising, why 5% matters to Wall Street and whether higher returns on bonds could change how investors choose between stocks and bonds.
Chapters:
0:00 Introduction
0:49 Why yields are rising
3:21 Investing in stocks vs. bonds
Produced and Shot by: Charlotte Morabito
Reporters: Matt Peterson, Liz Napolitano
Edited by: Andrea Miller
Animation: Jason Reginato, Emily Park
Additional camera: Romy Tarantino
Senior Managing Producer: Shawn Baldwin
Additional Footage: Getty Images
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Why The Era Of Easy-To-Ignore Bonds Might Be Over
Bonds are currently like headaches...there's no such thing as a good headache.
For perspective: the 10-year Treasury yield peaked at about 15.8% in September 1981, under Volcker. 5% only looks extreme because the 2010s were so unusually low.
A great, simple, but comprehensive, rudimentary explanation of the correlation of bond prices & yields, not available elsewhere.
This is the kind of content the internet needs.
Bonds are back because stocks stopped paying for the risk. S&P 500 forward P/E is 19.0 (FactSet), a 5.26% earnings yield. The 10-year pays 5.12%. That's a 0.14-point premium for owning equities, and the earnings side is still a forecast. Two paths: the 10-year eases back under 4.8% and the math works again, or it breaks above its Oct. 7 close of 5.28% and multiples have to compress. That 5.28% is the line to watch.
This is the basic info that I've been missing. All the noise over the bond market makes more sense now.
Huge supply, not great demand
The seesaw example makes it click. It also shows up in mortgages: Freddie Mac's 30-year average was 7.32% on Oct 22, the same day the 10-year yield dipped just under 5%. Does that gap between the two usually get this wide, or is something else pushing mortgage rates up?
A "BOND" is a 4 letter word
1:36 Nothing new under the *sign*?
0:15 bond yields ARE the AI bubble.
Bonds are IOUs. The yields are mostly based on expectations of future earnings/revenues/incomes of companies/governments issuing the bonds
Yeah in 90 s yield high. But debt level now is worrying. $10 debt with 10% rate much better than $1000 debt with 5% rate
The issue really is that 15 years ago when debt was more expensive, governments didn’t have 110% debt lol
Greatttt
Explain short term bonds
youngsters talking about high interest - this isn't high ... this is a reaction to 15 years of nonsense - now the world needs to pay the price for all the ridiculous spending tied to "free money" ... companies that only exist to get private equity companies 2% and more importantly nations drowning in debt
Even if they offer 8% yield I won't touch them with a ten foot pole until I'm 55
if bond is too high, money will just flood into the bond market instead of the stock market.....