Insights

More volatility for bonds as consumer demand drives surprisingly strong US growth

27 October 2023

This week has been notable for the volatility in bond markets. On Monday, the ongoing sell-off in US government bonds pushed yields even higher and the yield on US 10-year Treasury bonds rose above the psychologically important level of 5% - a level last seen in 2007. The prompted a swift rally as some investors considered the rally has gone too far. But remarkably robust US consumer spending helped to deliver surprisingly strong economic growth and the now familiar good news is bad news response followed. The logic goes that if consumer demand is this strong and wages are rising above inflation then the Federal Reserve will act more aggressively to tame inflation.