Why is Everyone Talking About the 10-year Treasury
- The headline this week centered on the 10-year U.S. Treasury yield, which rose slightly above 3% intraday for the first time since January 2014. The 10-year U.S. Treasury is a yard stick used to gauge long-term growth and inflation expectations and thus serve as a key indicator of where the U.S. economy is heading.
- The markets, which have been lethargic, sold off as they digested the news on concerns that higher interest rates could start eating into corporate profits and potentially signal more inflation.
- There is little debate that the economic expansion is classified as “late-cycle”, but that does not mean it must come to an early end. With the passage of the Tax Cuts and Jobs Act late last year, growth could accelerate throughout 2018, suggesting the end is not upon us just yet.