In the United States, the price of money squeezes everyone

When borrowing costs more, the bill is split among families, companies and governments.

The 10-year U.S. Treasury bond recorded an intraday peak yield of 5.364% on October 7, its highest level in 24 years. The backdrop includes the Federal Reserve's increase of its benchmark rate in September, inflationary pressures and geopolitical uncertainty in the Middle East. Selling bonds lowers their price and raises their yield: they are two sides of the same movement.

A high bond yield expresses what the market demands for lending money to the U.S. government through this type of instrument. That yield is shaped by expectations about inflation, growth, debt and monetary policy. 

Rising yields may reflect fear of persistent inflation, higher benchmark rates or a larger supply of public debt. By themselves, they do not show that investors expect growth to slow.

The everyday consequence of higher Treasury rates is that the cost of credit in general can rise. As a result, it will be more expensive for a company to expand its business; a family will face difficult conditions when buying a home; and a government will have to devote more resources to interest payments when it issues new debt or refinances, and fewer resources to social benefits.

For owners of large amounts of capital, higher yields mean opportunities to earn more interest through bonds or interest-bearing deposits; the real gain will also depend on inflation, taxes and risks, but for those who need credit, higher rates are a problem. That difference matters, since the same financial movement can benefit the owner of capital while complicating the worker who needs a loan or the entrepreneur trying to launch a first business.

Moreover, for small savers, buying a bond does not guarantee gains if they need short-term liquidity and must sell the bonds before maturity, because when yields rise, the prices of existing bonds usually fall. 

An economic policy that cares about ordinary people must combine fiscal and monetary responsibility with useful investment and social protection. Economies are not controlled by raising interest rates at any cost. Increases can favor those who hold interest-earning assets and hurt those who need credit; their effects must be weighed together with their capacity to contain inflation.