On Thursday, the 10-year yield topped the 1.7% mark for the first time since January 2020 as the 30-year yield also rose sharply. Rising yields are, in large part, a result of rising growth and inflation projections.
Nevertheless, the Federal Reserve has remained dovish, keeping rates near record lows and continuing bond purchases to push down yields. Chairman Powell continues to say that any near term inflation is likely to be transitory, but investors have their doubts.
And, while rates are rising, it’s important to recognize they’re still near historic lows and have been for over a decade, due in large part to Fed intervention. But as rates rise despite hefty bond purchases, is it time to retire Wall Street’s post Financial Crisis mantra “Don’t Fight The Fed”?
If rates do continue to rise, it could spell trouble for high-flying growth stocks as a rise in yields causes discount rates used in their valuations to rise as well. What do you think, how will inflation and long-term treasury yields develop?