The Bond Market Continues to Reel
Driven by inflation concerns, energy prices, and massive government borrowing, yields on the 10-year and 30-year notes reached levels not seen since 2002.
U.S. 10-year Treasury rates improved modestly after an auction that drew “strong demand.” That’s interesting because it might suggest investors are ducking and running for cover. They may be seeking safety and finding it in the U.S. market rather than elsewhere. That would reverse some of the trends we’ve seen in recent weeks.
This has pushed 30-year mortgage rates above 7.4% and has some analysts pausing about the economy’s resilience in weathering it. And again, it is a global phenomenon. The situation in some of Europe’s top markets is far more dire, and officials are making bold statements about austerity measures (to trim federal spending) at a time when those policies are unlikely to stick.
The recent rise in bond yields only compounds the pain for governments worldwide, as borrowing costs have soared since the start of the year.
We’ve Never Seen This Before…
The latest spot maritime rates are staggering. We’ve never seen the rate increases we’re seeing right now across most global markets.
We’ve never seen a 257% Y/Y increase in spot rates for shipping a maritime container between Shanghai and LA. Likewise, shipping to the US East Coast is up 226%, and the per-unit cost is now more than $10,428.
Even shipping between Asia and Europe is up 105% or more.
Again, we don’t have a lot of historical modeling that we can bump up against to figure out what this does to the market. Does it shut off new orders? Does it lead to runaway inflation?
Read more about how this, along with financial developments and other global issues, could affect your supply chain.
