Bond yields have been steadily rising ever since the stock markets began rallying, right about a year ago. The reversal in trend was a reflection of the growing appetite for risk, following the market turmoil of 2008. The long end of the curve may also reflect anticipation of both inflationary pressure over the longer run and the gradual withdrawal of government support (such as quantitative easing) for the economy.
The problem with rising yields is that maturities on the yield curve are typically used as reference benchmarks to set interest rates for various industries. The mortgage market, for examples, typically looks at the 10 year segment of the curve to set the interest rates that will be charged to the home buyer. With recent economic releases suggesting weakness in housing, employment and consumption, a rise in the yield curve is likely to have an asphyxiating effect on the health and recovery of the economy.
