Bond Market Woes Spell Higher Prices for Americans

Trouble in the US bond market is causing concern that higher prices may be here to stay. The yield on US Treasury bonds has been rising, driven by worries about inflation and the ongoing conflict with Iran.

The 10-year Treasury note hit its highest yield since 2023 on Tuesday, reaching 4.8%. This increase started in the spring when the US declared war in Iran and has continued to rise, despite a temporary ceasefire earlier in the summer.

Higher yields in the bond market typically signal concern about rising inflation, which has indeed ticked up since the start of the Iran conflict. Investors are also bracing for higher interest rates from the Federal Reserve, which could make borrowing more expensive even if the bond market calms.

Mortgage rates have already doubled since the pandemic, and the ongoing troubles in the bond market are expected to drive them even higher. The 30-year fixed-rate mortgage currently sits at 6.66%, with some predicting it will rise further after the bond market sell-off.