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Key US bond yield hits highest level since June 2008

<i>Spencer Platt/Getty Images</i><br/>
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Spencer Platt/Getty Images

By Paul R. La Monica, CNN Business

More bad news for anyone looking to buy a home: The benchmark 10-year Treasury bond yield rose to about 4.23% Thursday afternoon, the highest level since June 2008. Mortgage rates, which are now hovering just below 7%, tend to move in lockstep with the 10-year yield.

Many market experts believe that yields will move even higher in the short-term, thanks to rising expectations that the Federal Reserve will hike interest rates by three-quarters of a percentage point at both its November and December meetings. Still, investors brushed off fears of higher rates — in the morning at least.

Why? Earnings.

Strong corporate profits from Dow components IBM and chemicals giant Dow (yes, Dow is in the Dow) as well as telecom leader AT&T helped lift Wall Street’s mood early on in the day. Ma Bell was one of the biggest gainers in the S&P 500, surging nearly 8%.

The Dow rose nearly 400 points shortly after the opening bell but ended the session down more than 90 points, or 0.3%. The Nasdaq and S&P 500 fell 0.6% and 0.8% respectively after also rising initially.

All three indexes are still up for the month of October, after plunging in August and September.

It’s possible that investors are finally (albeit reluctantly) coming to grips with the fact that inflation is not going away anytime soon and that the Fed will have to be aggressive to continue fighting it.

Strong jobs numbers (initial unemployment claims fell this week) give the Fed cover to keep raising rates without worrying too much just yet about how rate hikes may slow the economy.

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