U.S. Treasury Bond Rate Surpasses 5%, Interest Rates Set to Rise
The 10-year U.S. Treasury bond rate has surpassed 5% for the first time since 2007, marking a significant milestone in global interest rates. The rise in interest rates is attributed to intensifying inflationary pressures and the attractiveness of U.S. government bonds weakening due to high-interest corporate bonds and national debt exceeding $40 trillion.
Experts warn that rising interest rates will lead to higher procurement costs for the government, borrowing costs for businesses and households, and shrinking investment and consumption. The 10-year rate has risen by 0.8 percentage points this year alone.
The Federal Reserve is likely to raise interest rates this week in response to inflationary pressures. The Consumer Price Index (CPI) rose 3.4% year-on-year last month, indicating that price pressures remain. According to the Chicago Mercantile Exchange (CME) FedWatch, the Federal Open Market Committee (FOMC) has a 92.3% chance of raising interest rates on the 16th in September.
The market is expecting an additional rate hike within this year following September's increase. JPMorgan predicted that an additional hike will take place this year following this month's rate hike, while Barclays economist Puja Sriram said 'one rate hike actually solves nothing.'