Rising yields have undoubtedly done a number on bond prices, but they open up bearish opportunities in certain inverse leverage exchange traded funds (ETFs).
With the S&P 500 Bond index turning negative for the year, bullish bond investors aren’t the only one feeling the pangs of the current macroeconomic environment. Rising yields are also translating to higher borrowing costs, affecting consumers’ ability to borrow money for high-ticket retail items.
“Bond yields, which impact borrowing costs for all kinds of loan products, moved higher this week as investors fretted over higher-for-longer interest rates,” Yahoo! Finance reported. “After notching a 16-year-record earlier this month, the yield on the 10-year Treasury bond continued to surge on Thursday, rising to 4.958%.”
As mentioned, this is affecting consumers’ ability to purchase high-ticket items. Among those items are real estate and cars, casting doubt on whether prospective borrowers want to take on loans with elevated interest rates.
“When 30-year mortgages and car loans cost you 8 percent it will impact consumer behavior,” said Blackstone President Jonathan Gray in the Financial Times. “Growth has been remarkably resilient, but if you keep policy this tight, this long, invariably you will cause the economy to slow down.”