Bond markets are being hit hard — and it’s likely to impact you

A trader works at the New York Stock Exchange on Oct. 11. Bond yields are surging, threatening to raise borrowing costs across the economy.

Angela Weiss/AFP via Getty Images

There is a sharp sell-off in the bond market, and it has big implications on both the economy and people’s pocketbooks.

Yields on U.S. government bonds, especially the 10-year Treasury note, determine the interest rates that people pay on a lot of their debt, including mortgages and credit cards.

And a key bond yield hasn’t been this high since 2007.

Several factors are driving the sell-off, including stronger-than-expected economic data and the government’s worsening finances.

Here is what you need to know about it.

How bad is the sell-off?

In 2022, the bond market suffered its worst year on record, as the Federal Reserve started raising interest rates aggressively to fight high inflation.

This year, the picture hasn’t improved much.

“It’s been a very difficult period in time for folks invested in Treasurys,” says Katie Nixon, the chief investment officer for wealth management at Northern Trust. “It’s been bad.”

After fluctuating at the beginning of the year, bond prices have been hit especially hard in recent weeks, sending their yields sharply higher.

Bond prices and yields have an inverse relationship, meaning prices fall when yields rise, and vice versa.

The yield on the 10-year Treasury note — widely considered to be one of the least-risky investments in the world — briefly broke above 5% on Monday. It hadn’t been that high since June 2007, when George W. Bush was in the White House and Ben Bernanke was running the Federal…