“Gradually, then suddenly.” — The Sun Also Rises
Lots of people are worried about rising long-term interest rates. Short-term interest rates are controlled by the central bank. But the Fed doesn’t usually intervene in the market for longer-term bonds, so when these interest rates move around, it means the market is telling us something. So a lot of people were worried when the yield on 30-year U.S. Treasury bonds jumped by 6 basis points (0.06%) the other day.
Why were people scared? Well, remember that when interest rates go up, it means bond prices went down. Which means that fewer people wanted to buy U.S. government bonds. This could be a signal of several bad things:
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It could signal expectations of higher inflation. When…