Real Interest Rates, Tech Sector Fuel US Treasury Yield Surge

US Treasury yields have surged in recent weeks, reaching levels not seen in years. According to Federal Reserve Bank of Cleveland President Beth Hammack, this increase is not driven by rising inflation concerns. Instead, Hammack attributed the rise in yields to a larger increase in real interest rates than in inflation expectations.

Hammack stated that inflation expectations remain relatively well-contained, and the rise in yields reflects a solid outlook for the US economy, competition for investor funds due to strong investment in the technology sector, and market repricing based on the outlook for monetary policy.

The yield on 10-year US Treasury notes reached 5.18% on September 24, up from 4.96% on September 22. The five-year yield also surpassed 5.03%, while the 30-year yield reached 5.47%. This has pushed up long-term borrowing costs in the US, with the average rate on 30-year mortgages surpassing 7% this week.