What Is Driving U.S. Treasury Yields Higher?

U.S. Treasury yields have climbed sharply, with the 10-year Treasury reaching its highest level in 20 years. The move has raised questions about inflation, Federal Reserve policy and the potential effect of higher borrowing costs across the economy.  In a recent episode of The Wealth Enterprise Briefing, Managing Partner Michael Zeuner and Senior Investment Manager Sam Sudame discuss why much of the recent increase has come from higher real yields, reflecting stronger economic growth and a greater demand for capital.  They discuss:  ·       Why real yields have accounted for most of the recent rise in Treasury rates.  ·       The relationship between economic growth, capital spending and inflation.  ·       How Federal Reserve policy affects short-term rates.  ·       Why fiscal concerns matter more for longer-term Treasury yields.  ·       The effect of rapidly rising yields on equity valuations and long-duration bonds.  ·       Why growth may support small-cap stocks, industrial commodities and commercial real estate.  ·       The pressure higher rates can place on homebuilding and gold.  ·       When borrowing costs could become high enough to slow economic activity.  Higher rates do not necessarily signal economic weakness. Their effect depends in part on what is causing them to rise and how quickly the increase occurs. If you would like to discuss the role of interest-rate risk in your portfolio, we welcome a conversation.  Important Information: The Wealth Enterprise Briefing contains our current opinions and commentary, which are subject to change without notice. The Briefing is distributed for informational and educational purposes only and does not consider the specific investment objective, financial situation or particular needs of any recipient. Information contained herein has been obtained from sources we believe to be reliable, but we do not guarantee its completeness or accuracy. The information in the Briefing is not a recommendation of any security, and should not be relied upon as investment, legal or tax advice. Please consult with your investment, legal and tax advisors regarding any implications of the information presented in this presentation.