6 Charts Show How The Surge In Bond Yields Is Being Felt By Consumers And Businesses

• Bond yields have spiked, with the 10-year Treasury surpassing 5% for the first time in three years.
• Higher borrowing costs are already being seen in consumer products like mortgages.
• These six charts show how the rise in borrowing costs is being felt, from consumer to corporate debt.

High interest rates are already making things more expensive for American consumers and businesses.

Bond yields have spiked in recent weeks, with fixed-income markets gripped by a sell-off that's hit government debt from the US to Japan. The yield on the 10-year US Treasury surpassed 5% on Monday for the first time since 2023. It's a closely watched level that makes investors anxious for a variety of reasons, and has been considered a "danger zone" for stocks.

The latest surge has largely been driven by concerns about the inflationary impact of higher oil prices, as well as worries about America's fiscal position amid surging debt and a widening budget deficit.

To top it off, investors are also expecting the Fed to hike rates when it wraps up its policy meeting this week, a move that could cause short-term yields to spike further as rate expectations rise. Markets are pricing in a 92% probability that the Fed lifts its target rate by 25 basis points, according to the CME FedWatch tool.

But Americans have already been feeling the pain of higher rates. These six charts show how higher borrowing costs have already hit consumers and businesses — and how rate increases could create even more pressure, from mortgages to credit cards to bankruptcies.

1. Mortgage rates have hit 7%

The average 30-year fixed mortgage rate rose to 7.07%, surpassing 7% for the first time since May of last year, according to Mortgage News Daily. Freddie Mac's estimate of the 30-year fixed rate clocked in at 6.76% in the last week.

2. Auto loan rates are elevated

Auto loan rates have risen over the last several years and remain elevated. The average finance rate for new car loans at carmakers' finance companies stood at 6.31% in June, 145 basis points higher than five years ago, according to the latest Fed data.

3. Credit card rates are also up

The average credit card interest rate rose for the second month in a row in September, rising to 23.8%, according to data from LendingTree. Commercial bank interest rates on credit card plans also remain elevated, standing at 20.9% in May, according to Fed data.

4. Corporate borrowing costs have surged

Corporations are also paying more to borrow. The effective yield on the ICE Bank of America US Corporate Index, one reflection of corporate borrowing costs, rose to 5.68% the last week, up 95 basis points from the yield recorded a year ago. High yield corporate spreads are also up.

This means that for high quality companies and those with less stellar credit quality are both paying more when they go to fund themselves in the loan market or in the bond markets.

5. Bankruptcies are on the rise

More businesses and individuals are also filing for bankruptcy. Bankruptcy filings rose 17% in the year leading up to the end of June, clocking in at 608,511, according to US Courts data. That's up 59% from the number of bankruptcy filings recorded in the same period in 2022.

Fitch on Monday reported that the default rate for private credit rose to a record in August, rising to 6.3%. The ratings agency said defaults in the month were led by healthcare companies.

6. Stocks are tumbling

US stocks have struggled against the the sell-off in bonds, which threatens to weigh on the so-called wealth effect, which says that, as Americans see their wealth on paper grow, they're more likely to keep spending and propping up the economy.

The robust American consumer could pull back, finance pros say, if stock wealth or a sudden decline in property prices amid an anemic housing market sour the mood.

The S&P 500 is down 2% in a month, and the tech-heavy Nasdaq 100 is down nearly 3%, most recently rattled by calls from industry executives to slow the pace of AI development.