Implications of U.S. Treasury Volatility for Entrepreneurs

Dan Nicholson

United States Treasury yield have everyone from institutional investors to entrepreneurs on watch. In particular, the benchmark 10-year notes is drawing attention. Such market tremors often raise questions about broader economic health, the potential for inflation, and how these changes might impact smaller businesses and startups.

The Current Landscape

The 10-year U.S. Treasury yields momentarily touched a 10-month high, driven primarily by stronger-than-anticipated retail sales in July. Additionally, the Federal Reserve's potential decision to maintain higher rates for longer than anticipated to bring inflation closer to its 2% annual target adds another layer of complexity.

What Drives Treasury Volatility?

This recent bout of volatility differs from previous years. Traditionally, the policy-sensitive short end of the yield curve (like the two-year Treasury) dictated these movements. Now, longer-dated bonds, like the 10-year and 30-year, are taking the lead. This suggests that there's a broader consensus on the Federal Reserve's interest-rate path and a multitude of factors influencing the long-term bonds.

The Key Factors Entrepreneurs Should Watch

Debt Sales & Quantitative Policies: The market is adjusting to the likelihood of increased debt sales by the U.S. government. Entrepreneurs should understand that a shift from quantitative easing (QE) to quantitative tightening (QT) could make borrowing more expensive.

Inflation Dynamics: Persistent inflation could mean higher interest rates for a longer period. For startups and SMEs, this could impact financing costs and consumer purchasing power.

International Uncertainties: Japan's exit from its yield curve control policy could introduce more volatility. For businesses with global supply chains or markets, this could mean unexpected price fluctuations.

Takeaways for Entrepreneurs

Stay Informed & Nimble: As the Treasury market continues to experience these ripples, entrepreneurs should remain abreast of the situation. Being proactive can ensure your business can adjust to any lending rate changes.

Reassess Financing Decisions: With potential rising interest rates, reassess any plans for borrowing or refinancing.

Diversify Your Strategies: Don't rely on a single market or supplier, especially if they're international. The interconnectedness of today's global economy means tremors in one region can impact businesses elsewhere.

Consumer Behavior: Increased retail sales can be a positive sign for consumer-facing businesses. However, Understanding underlying drivers is vital. For example, look at online sales spikes from events like Amazon Prime Day, which may be temporary.

Optimism with Caution: While there's a growing consensus that the U.S. might steer clear of a recession this year, entrepreneurs should remain vigilant. Prepare for potential slowdowns by maintaining lean operations and robust contingency plans.

While the U.S. Treasury yields' volatility may seem like a distant concern for many entrepreneurs, the undercurrents driving these fluctuations have tangible implications. By understanding and preparing for these shifts, entrepreneurs can ensure they're not just weathering the storm, but navigating it successfully.


Yahoo Finance

Washington Post

Dan Nicholson is the author of “Rigging the Game: How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Own Terms,” deemed a best-seller by USA Today and The Wall Street Journal. In addition to founding the award-winning accounting and financial consulting firm Nth Degree CPAs, Dan has created and run multiple small businesses, including Certainty U and the Certified Certainty Advisor program.

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