{"id":40875,"date":"2022-06-07T20:15:35","date_gmt":"2022-06-07T20:15:35","guid":{"rendered":"https:\/\/harchi90.com\/why-the-market-gets-nervous-whenever-the-10-year-treasury-hits-3\/"},"modified":"2022-06-07T20:15:35","modified_gmt":"2022-06-07T20:15:35","slug":"why-the-market-gets-nervous-whenever-the-10-year-treasury-hits-3","status":"publish","type":"post","link":"https:\/\/harchi90.com\/why-the-market-gets-nervous-whenever-the-10-year-treasury-hits-3\/","title":{"rendered":"Why the market gets nervous whenever the 10-year Treasury hits 3%"},"content":{"rendered":"<div>\n<div data-test=\"articleBody-2\" data-analytics=\"RegularArticle-articleBody-5-2\">\n<p><span hidden=\"\" aria-hidden=\"true\" class=\"ArticleBody-extraData\"><span hidden=\"\" aria-hidden=\"true\" class=\"ArticleBody-extraData\"><span hidden=\"\" aria-hidden=\"true\" class=\"xyz-data\">There&#8217;s a reason the stock market doesn&#8217;t like higher bond yields, and it has a lot to do with the burgeoning levels of government debt.  Treasury yields fell Tuesday, but the benchmark 10-year note remained above the psychologically important 3% level, a red line for investors who are sensitive to persistent inflation pressures and accompanying higher rates.  One reason the higher rates matter so much is that the government is carrying a $ 30.4 trillion debt load, which low interest rates are a key to managing.  Total public debt is now about 125% of GDP, or more than four times where it was in the early 1980s, the last time inflation was running this high.  Debt service alone on the federal debt reached $ 514.8 billion in 2021. In the days of the Volcker Federal Reserve in 1980, debt service totaled $ 107.5 billion.  Interest rates were much higher then, something the market is wary of when contemplating the impact rising yields could have on government and private finances.  &#8220;Neither the US government nor private business can afford +10 percent Treasury \/ corporate debt yields. Those were commonplace in the 1970s; they would be very damaging now,&#8221; DataTrek Research co-founder Nicholas Colas said in his market note late Monday.  &#8220;This is why we say the famous &#8216;Fed Put&#8217; has shifted from stocks to the Treasury market. [Fed Chair Jerome Powell] and the FOMC know that they must keep structural inflation at bay and Treasury yields low.  Much, much lower than the 1970s. &#8220;The Fed currently plans on instituting 100 basis points of rate hikes over the summer, likely followed by more increases, though at a slower pace, later in the year. Market pricing is for the fed funds rate to end 2022 in the 2.75% -3% range. Anything more than that could start to get scary. &#8220;We think this is one reason US equity markets get into trouble when Treasury yields hit 3 percent,&#8221; Colas wrote. &#8220;That was the case in Q4 2018, and the same is true now.  It&#8217;s not that a 3 percent cost of risk-free capital is inherently unmanageable, either for the Federal government or the private sector.  Rather, it is the market&#8217;s way of signaling the manifold uncertainties if rates don&#8217;t stop at 3 percent, but instead keep rising. &#8220;<\/span><\/span><\/span><span class=\"HighlightShare-hidden\" style=\"top:0;left:0\"\/><\/p>\n<\/div>\n<\/div>\n<p>    .<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There&#8217;s a reason the stock market doesn&#8217;t like higher bond yields, and it has a lot to do with the burgeoning levels of government debt. Treasury yields fell Tuesday, but the benchmark 10-year note remained above the psychologically important 3% level, a red line for investors who are sensitive to persistent inflation pressures and accompanying &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/harchi90.com\/why-the-market-gets-nervous-whenever-the-10-year-treasury-hits-3\/\"> <span class=\"screen-reader-text\">Why the market gets nervous whenever the 10-year Treasury hits 3%<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","spay_email":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[8],"tags":[915,118,111,519,112,18538],"jetpack_featured_media_url":"","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"fifu_image_url":"https:\/\/image.cnbcfm.com\/api\/v1\/image\/107069875-16541089042022-06-01t183857z_2068435823_rc25ju9csrc4_rtrmadp_0_usa-stocks.jpeg?v=1654109210&w=1920&h=1080","_links":{"self":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/posts\/40875"}],"collection":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/comments?post=40875"}],"version-history":[{"count":0,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/posts\/40875\/revisions"}],"wp:attachment":[{"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/media?parent=40875"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/categories?post=40875"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/harchi90.com\/wp-json\/wp\/v2\/tags?post=40875"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}