(Bloomberg) — The 20-year Treasury bond offered a grim warning as a selloff fueled by inflationary angst gripped global debt markets: 5% yields are already here.
If I understand correctly, the Treasury is being forced to raise the yields on long-term nominal bonds to make them sufficiently attractive to buyers who are concerned that Trump's promised tariffs are going to heat up inflation. But higher yields on new bonds decrease the market value of existing bonds and I've been noticing this effect on the NAV of a long-term bond fund for several weeks, now.
I guess it's especially painful/dangerous for banks which reportedly hold a lot of long-term debt instruments.
An important basic rule for most investors: Future interest rates are unknown, even to economists.
If I understand correctly, the Treasury is being forced to raise the yields on long-term nominal bonds to make them sufficiently attractive to buyers who are concerned that Trump's promised tariffs are going to heat up inflation. But higher yields on new bonds decrease the market value of existing bonds and I've been noticing this effect on the NAV of a long-term bond fund for several weeks, now.
I guess it's especially painful/dangerous for banks which reportedly hold a lot of long-term debt instruments.
An important basic rule for most investors: Future interest rates are unknown, even to economists.