The 10-year bond yield is simply back to normal, says Ed Yardeni

Summary

Ed Yardeni discusses why the 10-year Treasury yield has returned to a normal 4-5% range, arguing a healthy economy and heavy borrowing are driving yields but credit spreads show little stress. He says the Treasury is using buybacks, bill issuance and its TGA to signal it won't tolerate 5% yields. He also sees data-center spending slowing for political and supply reasons, which should help bonds.

• Yardeni says 10-year Treasury yields at 4-5% reflect a healthy economy, not bond market stress.
• He notes corporate bond spreads versus Treasuries have not widened despite heavy government and hyperscaler borrowing.
• Treasury buybacks, bill issuance and the $1 trillion TGA are tools to cap 10-year yields below 5%.
• He argues higher rates are not curbing corporate bond issuance for data centers.
• Data-center spending is slowing due to political pushback, semiconductor shortages and electricity shortages.
• That slowdown should help the bond market.
• Term premium is viewed via TIPS yield plus spread; TIPS around 2.5%, spread around 2% or higher.