00:00Bonds may be entering a regime change. U.S. Treasury yields are surging and that marks the
00:06end of an era of low borrowing costs. Nearly every major Treasury yield, and that's essentially the
00:13return investors get for lending money to the government, is 5% or above. What does it mean?
00:19It means that the 5% interest rate could be the new baseline. We have to ask the question,
00:26why are yields climbing? And number one, inflation. Oil is around $100 a barrel as the Iran war
00:33continues, and that is feeding through enterprises everywhere. Number two, the U.S. economy is still
00:39going strong. Businesses are doing incredibly well, and that makes inflation that much harder
00:44to come down. And number three, debt. The U.S. has a record $40 trillion debt load, big budget deficits,
00:51and plans to spend even more money. That means lots of government borrowing, and investors are
00:57demanding higher and higher and higher yields to absorb it. On top of all of this, there is the AI
01:03boom, and that means companies are borrowing even more to fund their projects, and they're competing
01:09with the very governments that are also issuing bonds to get cash. All of this is piling pressure
01:16on the Federal Reserve to just keep raising interest rates to fight higher prices. Now,
01:21importantly, this is not just a U.S. problem. Treasuries are a benchmark for borrowing costs
01:27around the world. So global government bond yields have risen to 4% on average now, and that's the
01:34highest since 2007. And it doesn't just impact bonds. Stocks here are impacted too, because bonds
01:43become more attractive with higher yields, and that puts pressure on share prices for emerging markets.
01:49Treasury yields that are higher can pull money back to the U.S., and it makes paying dollar debt that
01:55much more expensive for countries like Turkey and Brazil. Now, for U.S. homeowners, this is where the
02:01pain hits when the 30-year, for example, goes up really high as well. Mortgage rates are already at
02:077%. In other words, this isn't just a Wall Street or U.S. story. It can impact everything from
02:13your mortgage to your investments. And with inflation pressures continuing to pile up,
02:18there's still no firm end in sight to the bond sell-off.
