The Impact of Rising Treasury Yields on Financial Markets

Rising Treasury yields are causing concern in global financial markets as the longest-dated yield in the Treasury market approaches 5%, the highest level since before the 2007-2009 recession. The climb in yields reflects investors' demand for more compensation to hold Treasurys to maturity, given uncertainties that could emerge over the life of those securities. The bond-market selloff has burned existing holders of government debt and deepened the stock-market selloff. Reasons behind the current run-up in long-term rates include higher term premium, economic strength, and expectations of tighter monetary policy by the Federal Reserve.