00:00The world's most important bond yield has just risen to 5%. It's the highest since 2023.
00:08Why does this matter? The yield on the 10-year US Treasury bond is the benchmark price of borrowing
00:13costs around the world. So when these yields tend to rise, borrowing costs shoot up too.
00:20Now, things are a little bit different today compared to 2023. Back then,
00:24yields were rising because traders were betting that the Federal Reserve would have to hike
00:29interest rates and keep rates higher for longer. This time around, we've got inflation concerns due
00:34to the Iran war and higher energy prices. Now, for Americans, higher Treasury yields can feed
00:40into borrowing costs like your car loans and mortgages. And companies in the US also face
00:47rising borrowing costs as a result. And the US government has to also pay more to finance its
00:53$40 trillion of debt. But the impact doesn't just stop in the US. Treasuries are the benchmark
00:59against which assets around the globe are priced. And when investors can earn around 5%,
01:04lending to the US government, riskier investments such as bonds in Indonesia or stocks in South Africa
01:11must offer something better. It's also particularly important for the AI trade because AI stocks are
01:17priced for huge profits in the future. Higher yields make those future earnings less valuable
01:23today, pressuring investors to ask if they should pull some of their money out and put their money
01:29into US bonds. At the same time, companies need to borrow more and more to fund the massive AI
01:36infrastructure investments and that money just got a lot more expensive. Riskier emerging market stocks and
01:43bonds can feel the squeeze too. That's because higher US yields can pull capital toward America,
01:49raising borrowing costs and make refinancing dollar debt more difficult. So 5% isn't just a number for
01:56bond investors. It hikes up the price of money around the globe. If US yields keep rising, that could
02:02become one of the biggest tests yet for whether riskier stocks and credit can continue climbing or
02:09more investors will sell to put money into US bonds once again.
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