Investors' inflation expectations are pushing up borrowing costs

Data: U.S. Department of the Treasury; Chart: Michelle McGhee/AxiosBond investors are looking past last week's tepid consumer price index report that showed U.S. inflation rising at just 1.4% and continue selling out of Treasury bonds in a big way, pushing yields from the benchmark 10-year note to their highest since mid-March on Friday.Why it matters: Even at their still historically low levels, the market's rising inflation expectations are beginning to have an impact on the real economy by pushing mortgage, credit card and auto loan rates higher, making them more expensive for consumers.Where it stands: Mortgage rates increased in four of the first six weeks of 2021, data from the Mortgage Bankers Association showed last week.“With the 30-year fixed rate increasing to 2.96 percent — a high not seen since last November — refinances declined, and their share of total applications dipped to the lowest level in three months," Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement.Credit card balances and other revolving credit lines ticked down 0.3% month over month in December and fell by 10.8% year over year, the steepest decline ever, according to the Federal Reserve.The big picture: With the notable exception of mortgages and student loans, Americans consistently reduced and took on less debt as 2020 progressed. Banks also tightened lending standards and cut back lending, with the loan books at large U.S. banks shrinking for the first time in more than a decade and just the second time in 28 years, according to Barclays data.State of play: Both student loan and mortgage rates fell to their cheapest level ever in 2020 but those trends are beginning to reverse as investors price in higher inflation expectations and push bond yields higher.Ten-year breakeven inflation expectations rose to 2.23% on Friday, the highest since 2014, meaning investors are now pricing in average annual inflation of 2.23% for the next 10 years.Between the lines: As Treasury yields (considered the world's safest asset) are spiking and inflation expectations are hitting their highest levels in years, yields on high yield, or junk bonds, have fallen to the lowest in history.

Comments

Business News

Rachel Reeves told to restore Winter Fuel Payment for EVERY pensioner

Letitia James is hunting for insider trading in Trump's inner circle. Ex-prosecutors call her tariff inquiry unprecedented.

about 2 hours ago

I gave my number to a postman I had a crush on. Just 6 months after our first date, he proposed.

A boomer couldn't retire on $1,428 a month in Social Security, so she moved to France for cheaper rent and a vibrant social life: 'Everything about living here is just better'

about 3 hours ago

Kim Jong Un is opening a tourism mega-resort in North Korea. It's unclear how he'll fill its thousands of rooms.

about 3 hours ago

Millions of student-loan borrowers are about to be thrown into collections. Some say they're already 'barely scraping by.'

about 3 hours ago

See the ship-killing missile that US Marines deployed to a hot spot near Taiwan

Comments

Similar News

Natasha Oakley And Devin Brugman Join Hemp Period Brand Rif Care As Investors

New rules on buying crypto in Britain as FCA aims to ‘protect’ investors

The rise of retail investors in secondaries, and why delayed IPOs will become the norm

VC fund investors not raising alarms over SPAC trend

All Investor Eyes On Amazon: Earnings Out Today And Tariffs Are ‘Biggest Focus’

European ETFs post record $93bn inflows as investors shun US funds

Rio Tinto investors reject call to drop primary London listing

Rio Tinto investors reject call to drop primary London listing

The risky world of private assets opens up to retail investors

Rio Tinto investors reject call to drop London listing

Rio Tinto investors reject call to drop London listing

Investors are pressuring companies to get serious about AI

Investors approve Czech Sphinx's £3.6bn Royal Mail bid: Postal service falls into foreign hands for first time

Green energy chief quits BP as profits halve: Activist investor Elliott claims another scalp

Nervous investors are piling record amounts into Cash Isas, says Hargreaves Lansdown

Investors rush to buy gold coins as sales swell to record 46% in three months

Why investors are unwise to bet on elections

Investors beware: summer madness is here

Why investors are not buying Europe’s revival

Investors should avoid a new generation of rip-off ETFs

Business News

Rachel Reeves told to restore Winter Fuel Payment for EVERY pensioner

My collection of Jellycats is worth £2,000 – exact detail helped me spot rare one I bought for £20 that’s now worth £200

Energy firm to give households two hours of free electricity every week from tomorrow

UFC Veteran Retires In The Octagon After Vicious TKO Loss

Naoya Inoue Vs. Ramon Cardenas: What Time Does The Fight Card Start?

Stronger PAP Mandate Reaffirms Singapore’s Status As Global Wealth Hub

Home Bargains' 'flattering' £15 dress looks 'just like' £295 designer version

'I used the Silk'n LED mask with tightening EMS for 6 weeks - my redness and texture vanished'

7 easy to style and comfy to wear co-ords from high street brands like Reserved and Joules

Primark's 'gorgeous' £12 bags you can 'mix and match'

Tenants are being charged eviction fees even if they don't get evicted

Why our most basic assumptions about retirement may not add up

Trump's war on America's office elites

I'm no longer writing thank-you notes, and I'm not making my kids do it, either

Warren Buffett's biographer says he's 'literally not replaceable' as Berkshire Hathaway enters a new era

The 1 filler this cosmetic surgeon is begging you not to get

Trump suggested kids have too many dolls. He might be right, but we get a lot more than toys from China.

Employers are tapping this group of 'highly skilled' but underemployed people

Letitia James is hunting for insider trading in Trump's inner circle. Ex-prosecutors call her tariff inquiry unprecedented.

I gave my number to a postman I had a crush on. Just 6 months after our first date, he proposed.

Would the Housing Crisis Ease if Boomers Rented Out Their Empty Rooms?

My Boss Wants to Sleep on My Couch Every Week

Who Is Gregory Abel, Warren Buffett’s Successor?

Bank of England set to cut interest rates as US tariff impact in focus

Thai Billionaire Gets 24-Year Jail Term Over Alleged Illegal Golf Land Development

UFC 315 Full Fight Card: Muhammad Vs. Della Maddalena Headlines PPV

Big Bets On Which Of These Pathways Will Push Today’s AI To Become Prized AGI

Canelo Alvarez Vs. Terence Crawford: Date, Time And Location Confirmed

Bank of England set to cut interest rates as US tariff impact in focus

Millie Mackintosh praises travel neck pillow as the ‘first one that doesn’t hurt my neck’

WARREN SHUTE: 'Key savings rule has helped me put away money every month'

Tesco launches 'ultimate' new ready meal but shoppers have one complaint

Shoppers praise Next's £26 linen trousers that don't crease as 'lovely' and 'lightweight'

TONY HETHERINGTON: I lost £500,000 to a scam, but the solicitors who received the cash remain quiet

I landed my dream job at Adobe after applying to the company 12 times. A video cover letter helped me stand out.

A boomer couldn't retire on $1,428 a month in Social Security, so she moved to France for cheaper rent and a vibrant social life: 'Everything about living here is just better'

Kim Jong Un is opening a tourism mega-resort in North Korea. It's unclear how he'll fill its thousands of rooms.

Millions of student-loan borrowers are about to be thrown into collections. Some say they're already 'barely scraping by.'

See the ship-killing missile that US Marines deployed to a hot spot near Taiwan

How Carney's election win will change direction of trade war

‘I’m a mortgage expert at TSB - 7 ways to cut your bills and improve property EPC rating'

Urgent warning over Japanese knotweed signs that could cost you £18,000 this summer

Indiana Pacers Ability To Be Themselves Will Define Series Vs Cleveland Cavaliers

Canelo Alvarez Vs. Terence Crawford Fight Set For Sept. 12 In Vegas

Kentucky Derby Results: Sovereignty Wins, Journalism Places, Baeza Shows

UFC Results From Des Moines, Bonus Winners, Highlights And Reaction

Debenhams' two-in-one pizza oven and BBQ that whips up 'amazing pizzas' is £65 off

Sofia Richie-approved brand launches self tan that adapts to your skin tone and enhances perfume

'I made £500 from gold lying around at home - here's how to make money from old jewellery'

Important documents you must have in place now to protect your money

Next’s 'great fitting' £48 jacket that's ideal for chilly spring spells is now £21

‘Exceptional’ solar-powered water fountain that ‘brightens up gardens’ hits sale with 30% off

Amazon slashes price of Samsung Galaxy Watch to rival Samsung in flash deal

Majority of young people don't know financial education is on the curriculum

Charging an electric car at home is still CHEAPER than filling up with petrol

I want my US-based son to inherit his father's UK family home: How can I ensure this happens?

My British bitcoin holding company had its IPO two weeks ago and shares have doubled