US bond yields hit highest level since June 2008

New York CNN Business —

More bad news for anyone looking to buy a home: The benchmark yield on 10-year government bonds rose to around 4.22% on Thursday afternoon, the highest level since June 2008. Mortgage rates, now hovering just below 7%, are generally pulling in lockstep with the 10-year yield.

Many market experts believe that short-term interest rates will rise even higher, thanks to rising expectations that the Federal Reserve will raise interest rates by three-quarters of a percentage point during both November and December meetings. Still, investors brushed aside fears of higher yields – at least in the morning.

Why? Income.

Strong corporate earnings from Dow (DOW) components IBM (IBM), chemical giant Dow (DOW) (yes, Dow (DOW) is in the Dow (DOW)) and telecom leader AT&T (T) helped lift Wall Street’s mood. The Dow (DOW) rose in early trading but fell about 140 points, or 0.5%, around noon. The S&P 500 and Nasdaq each fell about 1%.

All three indices are still up for the month of October, after falling in August and September.

Investors may finally come to grips with the fact that inflation isn’t going away anytime soon and that the Fed will have to be aggressive to keep fighting it.

Strong job numbers (initial jobless claims fell this week) give the Fed cover to continue raising rates without worrying too much about how rate hikes could slow the economy.

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