Calculated Transmission Rates
How the simulated 10Y yield and risk spreads filter into real household borrowing:
Macroeconomic Mechanism Summary
With 76% of mortgage debt insulated at low fixed rates and +3.6% real wage growth, rising bond yields fail to trigger consumer distress. Higher money market interest actually supplements household non-labor interest income, maintaining consumer defiance.
Why Do Consumers Keep Spending Despite Higher Bond Yields?
In traditional monetary textbooks, surging 10-Year Treasury bond yields suppress aggregate demand by jacking up mortgage rates, vehicle financing, and commercial debt costs. Yet modern economic cycles have repeatedly shown consumer spending defying higher yields. This simulator grounds the exact structural mechanisms behind that phenomenon:
The Fixed-Rate Mortgage "Lock-In" Fortress
Over 70% of existing American mortgages were locked in during the 2020–2021 record-low era below 4.0%. When 10Y Treasury yields spike, new buyers face 7%+ mortgages, but existing homeowners experience zero increase in their monthly debt payment, preserving discretionary spending.
Real Wage Momentum & Labor Tightness
When nominal wage growth outpaces headline consumer price inflation, real purchasing power expands. Even as floating credit card APRs rise, steady employment and growing weekly paychecks sustain high-frequency discretionary consumption across dining, travel, and retail.
The Asset-Side Yield Dividend
Unlike previous cycles where households held low-yielding deposits, higher bond yields flow into 5%+ money-market funds and short-term Treasuries. Baby boomers and prime savers receive billions in net interest income monthly, which fuels active consumer spending.