NEW YORK: The US economy has maintained growth, hiring and investment despite higher borrowing costs and a Federal Reserve rate increase, while rising Treasury yields have unsettled bond investors.
Artificial intelligence spending has remained a particular source of strength. Technology companies continue investing in AI infrastructure even as financing costs rise.
Suggesting higher rates have yet to slow that part of the economy. Meanwhile, Treasury yields have become closely linked with oil prices in daily trading.
The relationship between 10-year Treasury yields and oil futures reached its tightest level on record this month. Stocks have generally moved in the opposite direction, with higher oil prices and yields coinciding with weaker equities.
This week broadly followed that pattern. Bond yields eased on Monday and Tuesday as oil prices retreated. However, yields climbed sharply alongside crude on Wednesday, before both rose again on Thursday.
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Economic resilience has complicated the bond market’s response to tighter monetary policy. Inflation, tariffs and borrowing costs have so far failed to produce the slowdown that higher interest rates would normally encourage.
AI investment has reinforced that resistance. Expectations of substantial returns have kept technology spending active even as financing becomes more expensive.
At the same time, the unusually close link between crude prices and Treasury yields has put energy markets at the centre of day-to-day bond trading.
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The US economy has continued to support growth, hiring and AI investment despite higher borrowing costs, while Treasury yields have moved closely with oil prices.
With input from The Wall Street Journal
