The USA Bond yields have spiked this week and rose by >50 bps to 4.5%
A high bond yield is costly for government as it makes borrowings expensive. The more the bond yield, the more interest government has to pay on its bonds.
For context, last year, USA paid >$1 Trillion in interest only. That’s size of Switzerland’s or Saudi Arabia’s gdp. Only in interest.
And hence any increase in bond yield is not a good outcome for USA.
What’s surprising traders and investors is this yield spike amidst rate cuts.
Also, some are believing this is caused because of erosion of trust caused by recent tarrifs on & off and the uncertainty around White House decisions.
And to add on top of this, it has spooked investors because dollar index (DXY) is also at 3 years low at 99 (Good for emerging markets like India).
These indicators suggest that things are not well with the USA.
Anyway, these are interesting times we rarely see in world of finance.
A good roller-coaster for adrenaline seekers.
