US 10-Year Yield Hits Nearly Two-Decade High Amid Inflation Concerns

The US 10-year Treasury yield has surged to its highest level since July 2007, reaching 5.11% and sparking concerns about inflation and interest rates. According to Mohamed El-Erian, chief economic adviser at Allianz, the surge was not entirely unexpected, given the fundamental drivers that have been pointing to this scenario for some time.

El-Erian noted that borrowing plans for major issuers, such as the government and large corporates, have been well telegraphed, and the Federal Reserve has been signaling strong economic activity. He also pointed out that psychological anchoring is playing a large role in markets, with the collective mindset shaped by more than a decade of artificially low, repressed yields following the 2008 Global Financial Crisis.

Other experts, such as economist Steve Hanke, have expressed caution about holding long-term US bonds. Hanke said he would not want to be holding these bonds and has been warning against them for months.