In the U.S., Strong Economic Growth and High Oil Prices Drive Rate Increases

The yield on ten-year US Treasuries climbed to 5.1%, a level not seen since July 2007, reflecting the growing tensions in the US bond markets. This rise comes at a time when several economic indicators point to a still robust US economy.

The combination of persistent inflation, sustained economic growth and persistently high oil prices is fuelling investors' expectations about the path of the Federal Reserve's key interest rates. These elements support the scenario of further monetary tightening, or at least of keeping rates at high levels for an extended period.

Rising bond yields have a direct impact on the cost of credit for U.S. households and businesses, including mortgage rates, which tend to follow the path of long-term Treasuries.

Markets are closely watching the Federal Reserve's upcoming announcements to assess whether the monetary institution will adjust policy in response to these persistent inflationary pressures and strong economic activity.

The level of ten-year yields, the highest in nearly two decades, illustrates the extent of the regime change in the fixed income markets since the period of low rates that prevailed for much of the 2010s.