[ELI5] what does the yield on the US bonds mean exactly and why is it a concern when they rise?
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US bonds are considered the safest investment because the US government isn’t going to default on its debt. The yield is the amount of interest they pay on a bond issued. When bond yields rise, that has lots of effects on investing markets and the economy. Higher cost to borrow makes it harder for the government to keep borrowing without exploding the national debt. Investors will flee other types of investments and other currencies. You’ll see money flow out of the stock market and into bonds when the guaranteed return is higher — an investor that would take their changes on the ups and downs of the stock market when the tradeoff is 8% return vs. 2% return might choose the safer option if the return is now 5%. And investors who have invested in other countries will want to buy the super safe American bonds if they’re now paying more, requiring that they sell Euros, Pounds, Yen, etc. to get the dollars they need.
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