Yields on US government bonds rose in response to the news, with the benchmark 10-year Treasury yield up 0.03 percentage points after the announcement to 4.48 per cent. The rise in yield represents a fall in price.
Yields on US government bonds rose in response to the news, with the benchmark 10-year Treasury yield up 0.03 percentage points after the announcement to 4.48 per cent. The rise in yield represents a fall in price.
I’m somewhat of an econ moron, what does this mean specifically in a material sense?
It means less faith in the US government actually paying its bills. And that means current bond prices will drop, (as their projected value when they mature is now less reliable), the government will need to pay higher rates to issue worthwhile bonds, etc… Bonds are how the government borrows money, so if the government wants to take out a loan, they’ll be paying more (higher interest rates) for it.
Basically, this is going “yeah this administration is so fucked that we’re not actually 100% positive that they’ll be able to pay off the loans they take.”
The last time this happened was when republicans stalled the budget during Obama’s term. A government shutdown was looming, and republicans ran obstruction so they could claim Obama failed to pass a budget bill. And now republicans have control of all three branches.
It means the government’s borrowing costs will increase. It will increase mortgage rates, borrowing rates for individuals, for businesses, municipalities and states. It will increase the costs of everything.
The United States will have to pay more interest to borrow money.
Think of it like credit scores, the US is making sketchy monetary decisions, so the score went down.