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Expand chart
Data: St. Louis Fed/Tradeweb; Chart: Axios Visuals

U.S. real yields are rising, meaning the cost of borrowing money is again turning positive — at least for longer maturities.

Why it matters: Borrowing money has essentially been free for quite some time, benefiting big companies (and governments) by allowing them to accumulate huge sums of debt that have little real cost.

  • Negative real yields — the value of U.S. Treasury yields minus inflation — have been a major justification for extreme price-to-earnings ratios for U.S. stock exchanges, particularly the Nasdaq.

State of play: The yield on 30-year Treasury Inflation-Protected Securities, aka real yields, turned positive on Friday for the first time since June 2020, according to Tradeweb data, punctuating a sizzling pickup that has been brewing over the last week.

  • 30-year real yields have risen 27 basis points from their Feb. 10 close and are up 40 basis points so far this year.
  • 10-year yields remain negative but have risen by 25 basis points since Feb. 10.

Be smart: "This means the economy is on the mend; so it’s not unhealthy that real yields are rising," Mark Holman, CEO of TwentyFour Asset Management, told Bloomberg.

  • "But I caution that if real yields rise too quickly, then that’s a problem for all asset classes. It’s the speed of the change that could be a worry."

The big picture: Increasing inflation expectations have sent nominal Treasury yields to their highest levels in nearly a year for 10- and 30-year maturities, with breakeven rates — which measure inflation expectations over time — rising to multiyear highs as well.

  • The difference between yields on the 5-year and 30-year Treasury bonds rose to the highest since 2014.

What to watch: A main reason for the increasing yields has been the Fed’s insistence that it won’t put the brakes on its easy-money policy and will allow for prices to run above its 2% target for "some time."

  • New York Fed President John Williams said on Friday that he is not worried that too much government spending could overheat the U.S. economy.

Go deeper

Cuomo barraged by fellow Dems after second harassment accusation

New York Gov. Andrew Cuomo faced a barrage of criticism from fellow Democrats after The New York Times reported that the second former aide in four days had accused him of sexual harassment.

Why it matters: Cuomo had faced a revolt from legislators for his handling of nursing-home deaths from COVID. Now, the scandal is acutely personal, with obviously grave political risk.

2 hours ago - Health

Fauci: Children "very likely" to get COVID vaccine at start of 2022

NIAID Director Anthony Fauci. Photo: Win McNamee/Getty Images)

Children under age 12 will "very likely" be able to get vaccinated for coronavirus at the "earliest the end of the year, and very likely the first quarter of 2022," NIAID Director Anthony Fauci told "Meet the Press" Sunday.

Why it matters: Children generally aren't at risk of serious coronavirus infections, but vaccinating them will be key to protecting the adults around them and, eventually, reaching herd immunity, writes Axios' Caitlin Owens.

Virginia lawmakers vote to legalize marijuana in 2024

Virginia Gov. Ralph Northam. Photo: Alex Edelman/Getty Images

Lawmakers in Virginia on Saturday approved compromise legislation that would legalize marijuana in 2024, putting the state a step closer to becoming the first in the South to end prohibition on the drug, the Richmond Times-Dispatch reports.

Why it matters: The legislation will make Virginia the 16th state to legalize marijuana, per Politico. It would add to a slate of laws that have seen Virginia move in a more progressive direction during the tenure of Gov. Ralph Northam.

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