In late August, the 10-year U.S. Treasury yield climbed above 4.3% for the first time in 16 years. Yields on short- and medium-term bonds have been rising in the past, but they had little effect on stock prices (Figure 1). However, with long-term bond yields surpassing the most recent high in October 2022, institutional investors may reduce risk assets such as stocks.
The reason why I am wary of a rise in long-term interest rates is my experience with Black Monday in October 1987. Looking back at US long-term interest rates and stock prices at the time, initially, long-term interest rates and stock prices were moving in the opposite direction, according to theory. However, the decline in interest rates has come to a halt…
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2023-09-03 15:03:19
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