Rising Bond Yields Signal Major Implications for Economy and Federal Reserve Policy

After years of low interest rates, yields on bonds are soaring again, with major implications for the economy.

The Federal Reserve is watching the bond market closely for signs of inflation and economic growth as it considers future interest rate hikes.

Higher bond yields are a double-edged sword, providing more income for savers but raising borrowing costs across the economy.

The growing US budget deficit requires the Treasury to issue more debt, which is driving up bond yields as demand fails to keep pace.

If bond yields rise high enough, they could restrain government spending and influence Fed policy, as the "bond vigilantes" did in the 1990s.