[Asia Economy New York=Special Correspondent Baek Jong-min] The yield on the U.S. 10-year Treasury note surpassed 1.5%. Along with the rise in yields, the decline in the U.S. stock market is also deepening.
According to MarketWatch on the 25th (local time), the 10-year Treasury yield surged to 1.503% in the morning. Although the yield later retreated to 1.481%, the strong trend continues.
Since the market's anticipated breakthrough of 1.5% was achieved, it does not seem easy to stop the upward trend.
Concerns about inflation are also confirmed in the expected inflation rate, which is the yield difference between Treasury notes and Treasury Inflation-Protected Securities (TIPS). The yield spread between the 10-year Treasury and the 10-year TIPS rose to 2.15%.
On the other hand, the yield spread between the 30-year Treasury and the 30-year TIPS was 2.1%, which is relatively lower.
The Wall Street Journal pointed out that the yield spread between the 5-year Treasury and the 5-year TIPS reached 2.4%, diagnosing that it is unusual for the expected inflation rate of long-term bonds to be lower than that of short-term bonds.
The Journal explained that the 5-year expected yield surpassing the 10-year yield is the first occurrence since 2008, and this phenomenon reflects expectations that the $1.9 trillion U.S. government stimulus package's impact on inflation will be short-lived or that the Federal Reserve will succeed in managing the 2% inflation target.
However, the Journal also noted the view that the market may have failed in forecasting long-term yields.
Reflecting the effect of rising yields, the New York stock market is showing weakness today. As of 11:52 a.m., the Nasdaq index, which is greatly affected by the rise in yields, fell 2.1%, and the Dow Jones Industrial Average, which hit an all-time high the previous day, also dropped 1%. Gold prices also fell by 1.2%. The dollar index, which shows the value of the dollar against major currencies, plunged 0.36% to 89.845.
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