Thursday, 10-year Treasury notes crept above 5 percent for the first time in several years — a development which had many news organizations scrambling to explain the wide-ranging implications for consumers and borrowers, from potentially higher credit card rates to more costly mortgages.
The editors at USA Today, on the other hand, sized up the story with a time-tested approach to business reporting, known as the see-no-evil, hear-no-evil method. In an article entitled, “5 percent yield on Treasury note ‘welcome,’” reporter Matt Krantz offered a counterintuitive “no news here” take on the news.
“Investors tend to fixate on round numbers, such as Dow 10,000 or Nasdaq 5000,” reported USA Today. “But the approach of another big round number, a 5 percent yield on the benchmark 10-year Treasury note, is looking to be a big non-event.”
“While higher interest rates can be poison for stocks, some market watchers figure this time will be different,” added USA Today. “Some even say they’re glad yields have finally risen after hovering around 4.5 percent for months: It shows the economy is chugging along at a healthy clip.”
So who were these market-watchers “welcoming” the increase in long-term treasury rates? Krantz introduces us to handful of cheery investment strategists, including a sunny guy aptly named David Joy.
“We’re encouraged to see it,” Joy, a market strategist at RiverSource Investments, told USA Today. “Moving to 5 percent and eventually 5.5 percent is welcome news and increasing the likelihood of a soft landing” for the economy.”
That soft, cuddly analysis, however, doesn’t appear to extend much beyond the pages of USA Today. Elsewhere, reporters appeared to have no problem digging up sources who were somewhat less “welcoming” of the news.
“If the 10-year Treasury bond rises much above 5 percent, it may put pressure on stock prices,” Phil Larkins, Atlanta money manager for Northern Trust, told the Atlanta Journal-Constitution.
“It’s an important psychological level, and the risk in rising yields won’t end anytime soon,” Michael Rottmann, head of fixed-income research at HVB Group in Munich, told the Washington Post.
“The 5 percent level is a psychological barrier that a lot of people don’t like to see,” said Matthew J. Smith, portfolio manager at Smith Affiliated Capital, told the Los Angeles Times. “It could weigh heavily on the stock market.”
“It’s more of a reason to believe that things are going to slow down,” Joshua Shapiro, a chief United States economist at MFR Inc., told the New York Times, in reference to the housing market.
It is possible, as some reporters pointed out, that the current bump in treasury rates reflects, in part, the time of year. According to the New York Times, for example, many investors historically sell off Treasury notes in April, presumably to pay off tax bills.
That said, it’s hard to believe that USA Today could write an article about rising treasury rates and not once mention the potential negative impact on the housing market.
Again, on this point, other reporters were less willing to bury their critical faculties.
“The era of cheap money may finally be nearing its end,” reported the New York Times. “Investors pushed up the yield on the benchmark 10-year Treasury note to its highest point in nearly four years today, signaling that some consumers will soon be paying more interest on credit cards and home mortgages. The change will have the biggest impact on people who took out home loans with low introductory interest rates but adjust to higher rates in later years.”
A potential impact that was also noted by the Los Angeles Times, which reported that “although U.S. economic data have remained robust — retail sales rose a better-than-expected 0.6 percent in March, the Commerce Department reported — strategists said higher interest rates were sure to eventually take a toll on consumers.”
“The softening in the housing market is probably the leading indicator as to where our economy is headed,” Stephen Kane, co-manager of the Metropolitan West Total Return Bond fund in Los Angeles, told the Times. “Yields at these levels will no doubt affect consumer spending.”
Too bad nobody told that to USA Today — or, as is perhaps the case, too bad USA Today failed to listen. There is nothing wrong with being counterintuitive, but there is also nothing terribly unique or smart about an argument whose strength is derived only from its omissions.