That sound you hear — on Wall Street, among homebuyers and among those who wring their hands about the U.S. government's fiscal position — is people realizing how much a surge in borrowing costs over the last few weeks is going to cost them.

Why it matters: The latest movements in the bond market mean more shoes may drop as the world adjusts to markedly higher rates — which were briefly at higher levels last fall, but aside from that episode, have not been this high since 2007.

• The 10-year Treasury note yielded 4.58% this morning, up from 3.86% on Feb. 1.
• That helps explain why April has been a bad month for stock market investors — with the S&P down about 4%. Higher rates for a longer period imply, all else equal, that stock valuations should be lower.
• Higher rates make the large U.S. fiscal deficits more costly; the Committee for a Responsible Federal Budget estimates interest costs alone are on track reach 3.2% of GDP next year, a new record.

State of play: It may create sticker shock among those looking to buy a house. The average 30-year fixed-rate mortgage was 7.43% yesterday, per Mortgage News Daily, up from 6.63% at the start of February.

• A world of higher rates for longer "seems to be an increasingly real possibility in the eyes of market participants, as well as some homebuyers and sellers," writes Hamilton Fout, vice president of economic and strategic research at housing finance giant Fannie Mae, in a post.
• He added that "the recent move upward in rates is yet another headwind to the recovery of home sales, and it intensifies longstanding affordability challenges for consumers."

Between the lines: Bond investors are losing confidence that the era of high inflation is ending on its own and the Federal Reserve will soon be able to declare victory and offer relief on rates.

• Notably, the rise in rates in the last several weeks has been driven primarily by a surge in real rates, not higher inflation expectations. It's not that investors anticipate higher inflation than they did two months ago, it's that they think the Fed will have to exert more pain to get there.
• The yield on five-year inflation protected bonds, for example, was 2.18% this morning, up from 1.63% on Feb. 1.

What they're saying: "We subscribe to the higher-for-longer view for interest rates due to our expectation that structural factors will keep economic growth resilient even as inflation remains stuck above the Fed's 2% target," writes Matt Eagan, portfolio manager at Loomis, Sayles & Company, in a note.

• "The upshot is that, when the rate cuts start, and we do believe that they'll start, it will be a much shallower reduction than we would normally [see] during times of structurally declining growth and inflation," he writes.

An early data point for April points to a downshift in the economic activity that looked to be accelerating in the early months of the year.

Driving the news: S&P Global's Flash Composite PMI fell 1.2 points to 50.9. That signals business activity that's still consistent with an economic expansion — but activity was the slowest since December.

What they're saying: "The U.S. economic upturn lost momentum at the start of the second quarter," Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.

Zoom in: Manufacturing and services businesses saw slower demand, with a drop in employment among services firms for the first time since 2020.

• Manufacturing businesses, meanwhile, reported a modest increase in staffing levels.
• "Some service providers suggested that elevated interest rates and high prices had restricted demand during the month," S&P said in the release.

What to watch: Cooler activity resulted in similarly muted inflation pressures.

• "The deterioration of demand and cooling of the labor market fed through to lower price pressures, as April saw a welcome easing in rates of increase for selling prices for both goods and services," Williamson said.

The intrigue: The PMI report shows something of a handoff of inflation drivers.

• Manufacturing has seen prices rising at faster rates in recent months, a result of factory costs "intensifying in April amid higher raw material and fuel prices."
• That contrasts "with the wage-related, services-led price pressures seen throughout much of 2023," Williamson said.