Ten-year Treasury note yields reached their all-time low of 1.359% in mid-2016. Since then (amidst a few wobbles) the trend has generally been upward both in the U.S. and abroad. However, it has really only been this most recent surge over the last few weeks that has caused the market angst. Yields have gone from 2.41% at the end of December to 2.86% earlier this week (the highest yield since January 2014, and equates to a negative total return of 5.9%), which has left investors questioning what is actually behind the increase. The answer to this should also provide them with a better sense of both how much further yields might go and what kind of risks the increase poses for just about every other financial asset. Hence, in this week's Economics Weekly, we attempt to do this by breaking down the 10-year T-Note yield into its component parts to ascertain what has been driving these changes.
For a copy of this report or to subscribe to the Economics Weekly or Economic Indicators reports, please contact your William Blair representative.
Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.