US 10-year maturity government bond interest rate 4.286%… Highest since July
“Concerns about the economic impact of Trump’s expansionary policies are driving the surge.”
U.S. long-term government bond yields (interest rates) reached the highest level in the past three months. This is due to the high possibility that US Republican presidential candidate Donald Trump will return to power.
If candidate Trump is elected, concerns are growing that his expansionary economic policies could cause fiscal deficits and inflation, which could lower U.S. bond prices, and some are predicting that the rise in government bond yields could continue for a long time.
According to the Wall Street Journal (WSJ) on the 28th (local time), the US 10-year maturity Treasury yield (interest rate) closed at 4.286%, up 4bp (1bp = 0.01%p) from the previous day. This is the highest since last July.
The two-year maturity government bond interest rate also rose 3bp from the previous trading day to 4.153%. This is also the highest figure in three months.
As U.S. Treasury yields soar, the dollar bull market continues.
According to Market Watch, the dollar index, which refers to the relative value of the dollar against the currencies of six major countries, rose 0.06 points (0.02%) from the previous day to 104.32.
The interest rate has risen for three consecutive trading days and is up about 3-4% compared to a month ago. In particular, it has maintained an upward trend since it surpassed 104 for the first time in about two months on the 21st.
If the dollar index exceeds the baseline of 100, it means that the value of the dollar is strong.
The reason why U.S. Treasury yields are rising like this is because investors see a high possibility of former President Trump being elected.
Investors believe that if candidate Trump returns to the White House, his expansionary fiscal policies such as ‘tariff increase’ and ‘expansion of government spending’ will lead to a huge fiscal deficit, and the US government is likely to expand the issuance of government bonds.
In fact, long-term U.S. government bond interest rates are directly proportional to candidate Trump’s likelihood of being elected.
Treasury yields rose significantly as candidate Trump showed heroism by surviving a series of assassination attempts and dominated the debate with former Democratic presidential candidate President Joe Biden.
However, as incumbent Democratic presidential candidate Kamala Harris gained significant support after July 22, when she took over the presidential candidacy from President Biden, the yield on 10-year Treasury bonds fell from the 4% range to the 3% range.
Since then, as recent opinion polls have been released one after another showing that he has a slight advantage in the confrontation with Vice President Harris, government bond yields are on the rise.
In particular, economists and traders are predicting that if former President Trump is elected, the upward trend in bond yields could continue for a long time. Some predict that government bond interest rates could soar up to 5%.
Joe Neudecaer, an emerging markets investor at British investment firm Polar Capital, said former President Trump’s fiscal policies could increase the U.S. deficit and stimulate inflation, raising borrowing costs globally. .
It was also predicted that this situation could lead to a plunge in the valuation applied to international stocks by investors, leading to a sharp rise in government bond yields.
There is an inverse relationship between bond yields and prices, and in particular, the yield on 10-year government bonds usually increases the greater the expectation that the economy will worsen.
“If former President Trump were to spend really heavily, the 10-year U.S. yield could soar to 5%, and this would apply to all valuation models in financial markets around the world,” Neudecaer said.
[서울=뉴시스]