Rising interest rates in the U.S. have pushed the yield on 10-year Treasury bonds higher than the yields for similar government bonds from seven major developed countries for the first times since June 2010, according to an analysis by Bianco Research cited by The Wall Street Journal. The yield on 10-year Treasuries recently set a record, topping the yields on 10-year bonds from more countries than ever before, according to Deutsche Bank Research cited by the Journal. And the payout on 10-year Treasuries surpassed that on 10-year German bunds by the most in almost three decades.
“The U.S. has the highest rates of everyone in the G-10 and it looks like the rate differential will continue to widen,” Chris Gaffney, president of EverBank World Markets, told the Journal. “The U.S. seems to be going it alone in this rising interest-rate path.”
The yield on 10-year Treasuries topped 3.1 percent last week and though it has edged lower since then it remains near a seven-year high.
“Analysts said the rise in yields in part reflects optimism about the U.S. economy and expectations for a pickup in inflation, which threatens the value of government bonds by eroding the purchasing power of their fixed payments,” the Journal’s Daniel Kruger reports. “The climb also shows the impact of the recent tax cut package and a surge in government spending. Those have boosted short-term growth expectations while increasing borrowing and the supply of Treasury bonds, which can hurt bond prices. That comes as the Fed has raised interest rates in recent years and begun paring bond holdings accumulated during the financial crisis, unwinding stimulus policies like those that continue to keep rates low in many other countries.”