Treasury yield causing concern over growth after election

Changing Fed’s lower-for-longer yield theme

President-elect Donald Trump is changing the finance markets, but some strategists are starting to show concern about the sudden increase in the Treasury yield, according to an article by Barbara Kollymeyer for Market Watch.

In the aftermath of Trump’s victory, the stock market rose sharply, reaching record highs late last week.

Mortgage rates rose drastically during the first week of the nation’s new President-elect. But now it seems that the Treasury yield increase driving those mortgage rates is turning into a cause for concern.

Goldman Sachs even warned its clients that the speed of the move worries the company that there will be a deeper fallout in interest-rate markets, according to the article.

This chart showed the increase in the 10-year Treasury yield after Trump was elected.

From the article:

Even before the renewed leg to the selloff began, Goldman Sachs analyst Francesco Garzarelli was warning clients about the possibility of things getting much worse. He said in a note out Friday higher yields aren’t a huge surprise as markets need to replace U.S. inflation expectations from “very depressed levels.”

“The speed of the move is, however, concerning, as the direct and indirect exposure to the ‘lower for longer yields’ theme across asset markets is pervasive,” said Garzarelli, who added that the bank’s analysis suggests in principle there is “more headroom for nominal yields and break-even inflation to rise.”

A study from TransUnion shows that if the Fed does raise interest rates, it could cause a payment shock for over 9 million consumers. And, that's not just for homeowners, but a wide swath of borrowers. While this is relatively small considering the amount of total homeowners, this is considering an increase of just 25 basis points.

3d rendering of a row of luxury townhouses along a street

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