US Economy Faces Recession Risk as Yields Reach 20-Year Highs

The Federal Reserve's attempt to avoid a recession is being tested as long-term interest rates reach their highest levels since 2007. The surge in 10-year Treasury yields, surpassing 4.7%, raises concerns of a potential financial blowup and increased borrowing costs for consumers and companies. The rise in real rates, which remove the impact of inflation, further exacerbates the situation. While the Fed has not resisted the increase in long-term rates, some market participants worry that it may have unintended consequences. The rise in rates comes at a time when the economy is already facing headwinds, potentially pushing it into a recession. Triggers for the surge in yields include concerns about US budget deficits, slackening demand for Treasury securities, and uncertainty surrounding the Fed's stance on real interest rates.