Yesterday, for example, yields on 30-year U.S. Treasury bonds jumped to 5.65 percent, from 5.51 percent at Wednesday’s close, after reports that January sales of existing homes rose to a record level while new orders for factory goods turned out to be unexpectedly strong for the second month. Just a month earlier, yields were at 5.12 percent.
Stronger economic growth increases the demand for credit by households and businesses, which tends to boost rates. Expectations about growth also play a significant role, both in terms of the demand for credit and whether, in the current situation, the Fed may decide to raise short-term rates to slow growth and contain inflation. Any Fed action — or an expectation of action — on short-term rates usually is reflected in part in longer-term rates.
