Prudential benefits from 30-year Treasury yield hitting 19-year high

The 30-year US Treasury yield touched 5.33% intraday around August 18, its highest level since June 2007. For most corners of the financial world, yields at these levels create headaches. For life insurers like Prudential, they create something closer to a windfall. The logic is straightforward: life insurance companies collect premiums today and pay claims decades from now. In between, they invest that money, overwhelmingly in bonds and mortgages. When long-term yields spike, every dollar reinvested locks in fatter returns for 20 or 30 years. Why this yield matters more than most The 30-year yield closing between 5.27% and 5.37% during recent weeks represents a level the bond market hasn’t sustained since the pre-financial-crisis era. Several forces are pushing yields higher simultaneously. US fiscal deficits are running near $2 trillion annually. The national debt has approached $40 trillion. That means the Treasury Department is flooding the market with bonds to fund government spending, and investors are demanding higher compensation to absorb the supply. Inflation hasn’t cooperated either. The Consumer Price Index has stabilized around 3.4%, well above the Federal Reserve’s 2%...