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US gov’t bonds plummet amid inflation concerns

 US gov’t bonds plummet amid inflation concerns

Exterior of the US Treasury Department building

Douglas Rissing/Getty Images

On Wednesdays, the Brew’s Sam Klebanov highlights a fascinating stock, commodity, or other asset that’s worth your attention.

Investors are dumping IOUs from Uncle Sam. Government bond prices fell this week, pushing 30-year yields—which move in the opposite direction to prices—to 5.19% yesterday, the highest level since July 2007.

Everyone is worried about inflation accelerating:

  • Analysts say the risk of prices rising faster due to a prolonged Strait of Hormuz closure has investors expecting that the Fed won’t lower borrowing costs this year, which makes the current bonds that offer lower interest look as appealing as a hot tub in July.
  • The market went from anticipating three rate cuts this year to now a rate hike.

Growing government debt further cheapens federal bonds. The US national debt for last year’s Q4 was 122% of GDP, up from 105% during the same period in 2019.

This affects you even if you’re not a bond trader. Rising government bond yields can translate to higher mortgage rates and more expensive auto loans.

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