Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Bond Yields Rise As Inflation Pessimism Takes Hold

By (Darrell Delamaide/ 12, 2021 09:58
Bond Yields Rise As Inflation Pessimism Takes Hold
By (Darrell Delamaide/   |  Oct 12, 2021 09:58
Saved. See Saved Items.
This article has already been saved in your Saved Items

Yield on the benchmark 10-year Treasury note shot up above 1.6% on Friday after a disappointing jobs report which investors decided wasn’t disappointing enough that it would stop the Federal Reserve from announcing a reduction in its bond purchases in November.

US 10-year Weekly Chart
US 10-year Weekly Chart

US bond markets were closed on Monday for a holiday, but Treasury futures showed continued weakness. Nonfarm payrolls increased by only 194,000 in September, less than half the 500,000 forecast. The only consolation was that the headline unemployment rate declined to 4.8%, compared to the forecast of 5.1%.

Wages rose 0.6% on the month, and 4.6% on the year. Former Treasury Secretary Steven Mnuchin warned on Thursday that overspending by the Biden administration could spur inflation in the coming months. Stating at a Bloomberg conference:

“I do worry that this will be ongoing inflation, and we could easily end up with 3.5% 10-year Treasuries, which again just increases the cost of the national debt and creates budget issues.”

On cue, the yield rose from 1.55% following Friday’s jobs report. Mnuchin has gone back to private equity investing after serving four years as head of the Treasury Department, and has raised $2.5 billion for his new Liberty Strategic Capital.

Mnuchin, who was also a movie producer, has to his credit that he survived four years in President Donald Trump’s cabinet. A report on Sunday further added to his credibility by claiming he intervened to block the president from appointing his daughter Ivanka to head the World Bank in 2019. The nod instead went to David Malpass, a Treasury Department veteran.

Inflation Affect On Global Yields; Made Worse By Energy Woes

Inflation has become a global worry. Yield on Japan’s 10-year government bonds rose half a basis point on Monday to 0.85% as they followed US Treasury yields higher.

UK 10-year Weekly Chart
UK 10-year Weekly Chart

In Europe, government bonds continued to fall in price, boosting yields. Yield on UK bonds rose 5 basis points after Bank of England officials warned over the weekend about inflation risk.

The rise in UK yields pulled up those in the eurozone. Yield on Germany’s benchmark 10-year bond rose 2.5 bps to minus 0.108%, marking a rise of 20 bps in a month as it nears a positive yield.

European Central Bank chief economist Philip Lane played down the potential impact of inflation on yields, saying the current rate is not an automatic trigger for monetary action. Nonetheless, money market futures indicate investors anticipate an ECB rate increase by December 2022, or even by next September.

Analysts see supply shortages and rising energy demand as driving inflation. US crude oil prices closed above $80 a barrel for the first time since 2014. Brent crude, the benchmark for European oil, closed even higher, above $83, as some economists forecast a price of $100 a barrel.

Energy shortages are contributing to rising inflation. Natural gas shortages are causing sharp increases in prices as winter approaches. The renewed demand for fossil fuels is undercutting the Glasgow summit on climate change starting end of October.

Government bond yields are reflecting this increasingly pessimistic picture. As the 10-year Treasury note yield tops 1.6%, analysts say it could quickly get back to its 1.75% peak from earlier this year.

Economists point to everything from a slowdown in restaurant eating to a subpar debut by the new James Bond film as indicators of slower growth. Goldman Sachs cut its closely watched forecast for US growth for the second time in two months, now predicting 5.6% for this year instead of 5.7%, and 4.0% for next year instead of 4.4%.

Slower growth, higher inflation, rising bond yields are all unsettling harbingers of trouble ahead.

Bond Yields Rise As Inflation Pessimism Takes Hold
Bond Yields Rise As Inflation Pessimism Takes Hold

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email