Interest Rates Move Higher On Signs Of Improving Economy

Long-term interest rates are ticking higher. The yield on the 10-year Treasury bond hit 3 percent Thursday. After a long period of extraordinarily low rates, analysts say the improving economy and a slightly less accommodating Fed will combine to make borrowing a bit more expensive.

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Other signs of strength in the economy are sending interest rates higher. Yesterday, the yield on the 10-year Treasury note briefly rose above the psychologically important level of 3 percent.

NPR's Jim Zarroli has that story.

JIM ZARROLI, BYLINE: The 10-year note rose after a report that first time unemployment claims fell unexpectedly last week. It stayed above 3 percent for just a short time, but it was the kind of move that the markets pay a lot of attention to. The 10-year note is used as a benchmark for a lot of different kinds of credit, including student loans and mortgages.

Rates have been rising for months because of signs that the economy is improving, and because the Federal Reserve is cutting back on stimulus measures, says economist Bernard Baumohl of The Economic Outlook Group.

BERNARD BAUMOHL: This is really quite normal to see yields rise for an economy that is gaining some traction.

ZARROLI: But Baumohl also says growth isn't all that strong and the economy still has a lot of slack. Unemployment is an issue, wages aren't climbing very much and the U.S. budget deficit is falling. That means the government won't need to borrow as much, which means less demand for credit. And Baumohl says he doesn't look for interest rates to climb too much more in the months to come.

Jim Zarroli, NPR News, New York.

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