The yield on 30-year US Treasuries has risen to 5.70%. This is the highest level since 2002. At the same time, the yield on 10-year notes is holding around 5.32%, also near multi-decade highs.
What is happening in the bond market
The market passed the 5.40% zone on 30-year bonds back in the last week of September. Since then, there has been no reversal. Yields above 5% persist across a significant portion of the US government debt curve. This means investors continue to demand an elevated premium for long-term US borrowing.
Why yields are rising
A bond's yield moves in the opposite direction to its price. When investors sell bonds, their price falls and the yield rises. Buyers agree to take on the debt only at a lower price and with a higher potential yield. What matters for the market is not only the new high, but also that the high cost of borrowing may persist even without further Fed rate hikes.
What this means for the economy
High long-term government bond yields affect the cost of money throughout the economy. They are reflected in:
- mortgage rates;
- corporate loans;
- refinancing costs;
- stock valuations;
- the attractiveness of gold and other non-interest-bearing assets.
The longer yields remain high, the tighter financial conditions become.
How gold is reacting
Gold is losing another 1% and is trading around $4,117. Last week, XAU/USD failed to hold above $4,200. Rising yields weigh on the metal because gold pays no coupon income. When US Treasuries yield more than 5%, holding a non-interest-bearing asset becomes less attractive.
What is happening with stocks
US indices are so far holding relatively steady. But each new rise in yields raises the bar against which investors compare the expected return on stocks. If risk-free government securities yield more than 5%, risky assets must offer a higher potential return to remain attractive. This can weigh on company valuations even without a deterioration in corporate earnings.
What's next
The 30-year yield has already approached the 6% level. The market is increasingly discussing the possibility of testing this mark. The key question is how high long-term yields can rise before they start to weigh more heavily on the economy, the stock market and other asset classes.
Did you trade gold around this rise in yields?
On days like these, movement in gold and indices is often driven not by a single macroeconomic report, but by the dynamics of the debt market. In prop trading, the conditions of a specific program matter. In some cases, leverage on gold is limited; in others, separate rules apply to holding positions overnight or over the weekend, and daily drawdown limits may be calculated differently. These conditions are best checked in advance, before buying a challenge.