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MARKETS & BUSINESS
The 5% Bond Yield Is Becoming a Business Problem
Something unusual is happening in financial markets: long-term government
bond yields are moving toward levels investors have not seen in years.
The U.S. 10-year Treasury yield recently approached 5%, while longer-term
yields climbed even higher. That may sound like a Wall Street issue, but
borrowing costs eventually reach the real economy.
Why it matters:
Expensive money changes which projects get funded, which companies expand,
and which investments still make financial sense.
A company considering a new factory, acquisition or technology project may
have expected the capital to cost one amount. If financing becomes
significantly more expensive, the same project can suddenly produce a much
weaker return.
Cheap money hides mistakes
Higher rates can be painful, but they can also expose weak business models.
When capital is no longer cheap, companies have to become more selective about
where every dollar goes.
For investors and entrepreneurs, that can be a useful filter: the best
businesses should still make sense when money has a real price.
Share Your Opinion
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