The benchmark 10-year Treasury yield, which influences consumer borrowing costs for credit cards, auto loans and mortgages, rose again last week.
The primary driver behind the increase is investors demanding higher returns amid policy uncertainty. The term premium – the compensation investors require for the risk of interest rate fluctuations over the life of a bond – has been rising.
Tariffs and deportations could push prices higher while slowing economic growth. Elevated yields may further cool the labor market, which is already showing signs of strain.
While the weekly number of initial claims – the inflow into insured unemployment – remains low, continued claims – the stock of individuals collecting unemployment insurance – continues to rise. This is largely due to a declining number of job openings and hiring rates that have dropped to their lowest level since the aftermath of the global financial crisis.
This week’s economic data is expected to offer a mix of signals, with both meaningful insights and noise.
The Chicago Business Barometer, a leading indicator of economic activity that has declined for two consecutive months, is projected to rise slightly in December. Meanwhile, residential construction spending and pending home sales are likely to soften from the previous month as mortgage rates continue to climb. Manufacturing sector activity, as measured by the ISM Manufacturing Index, is expected to remain in contraction territory.
