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Inflation is the persistent rise in the prices of goods and services in an economy over a period of time, leading to a reduction in the purchasing power as each unit of currency buys fewer goods and services.
Price inflation is measured by the inflation rate, the percentage change of prices calculated on a monthly or annual basis in a price index. Around the world, the Consumer Price Index (CPI) is the most commonly used index to calculate the inflation rate, which measures the price of a representative selection of goods and services for a typical consumer. For example, if the inflation rate is measured at 5%, a loaf of bread that costs $1 today will cost $1.05 in a year.
What causes inflation?
There are at least three theories that are generally accepted.
In a booming economy, strong consumer demand for goods and services may outweigh the aggregate supply and cause the price levels to rise. In other words, if demand is growing faster than supply, prices will increase. This is often referred as Demand-Pull Inflation, a term mostly associated with Keynesian economics.
Most modern asset bubbles including the U.S. housing bubble which peaked in 2006 fall into this category. The increase in the value of Gold in the aftermath of 2008 financial crisis is another example.
An increase in prices of inputs like wages, taxes, imports and raw materials, or other influential factors such as natural disasters, depletion of natural resources, government regulation, change in exchange rates etc., may push the costs of production higher and weaken the supply of goods as it becomes more expensive now to make the same volume as they were before the surge in production costs. While the demand for these goods remain consistent, the shortage in supply causes a rise in the overall price level. In other words, inflation happens when costs increase independently of aggregate demand. This type of inflation is referred as Cost-Push Inflation, another term associated with Keynesian economics.
In 2011, the earthquake and tsunami disaster caused inflation to go up temporarily in deflation-ridden Japan.
As the push for higher federal minimum wages has gained momentum in U.S. these days, the naysayers often cite references to cost-push inflation -- they argue that if the base wages are raised, the manufacturers may feel obligated to pass these increases onto consumers in the form of higher prices.
Over expansion or increase in the money supply in the form of cash and credit may create inflation. If a country prints too much money, the value of the money decreases proportional to the amount of money that was printed. Despite no changes to the aggregate demand or supply, having too much money chasing too few goods can cause the prices of just about everything to increase. If too much money is printed, it becomes worthless to the point where objects are exchanged for goods in place of paper money (bartering).
In year 2000, Zimbabwean Government engaged in money creation activity to fund the Congo war. Coupled with the fact that the money was created with nothing to back it up to give it a value, droughts and private farm confiscation by the government further weakened the supply of food and other locally produced goods. Eventually people holding the Zimbabwean dollar (symbol: Z$) lost confidence in its ability to retain its value, and the series of events that followed led to prolonged hyperinflation between years 2004 and 2009, which ultimately ended with the demise of the Zimbabwean dollar in April 2009. The peak month of hyperinflation occurred in mid-November 2008 with a rate estimated at 79.6 billion percent per month.
Source: various including investopedia, wikipedia, economicshelp.org
(To be continued ..)
Labels: Economics Inflation
 Solaris 11+ : changing hostname
Starting with Solaris 11, a system's identify (nodename) is configured through the
config/nodename service property of the
svc:/system/identity:node SMF service. Solaris 10 and prior versions have this information in
/etc/nodename configuration file.
The following example demonstrates the commands to change the hostname from "ihcm-db-01" to "ehcm-db-01".eg.,
# hostname ihcm-db-01 # svccfg -s system/identity:node listprop config config application config/enable_mapping boolean true config/ignore_dhcp_hostname boolean false config/nodename astring ihcm-db-01 config/loopback astring ihcm-db-01 # # svccfg -s system/identity:node setprop config/nodename="ehcm-db-01" # svccfg -s system/identity:node refresh -OR- # svcadm refresh svc:/system/identity:node # svcadm restart system/identity:node # svccfg -s system/identity:node listprop config config application config/enable_mapping boolean true config/ignore_dhcp_hostname boolean false config/nodename astring ehcm-db-01 config/loopback astring ehcm-db-01 # hostname ehcm-db-01
 Parallel Compression
This topic is not Solaris specific, but certainly helps Solaris users who are frustrated with the single threaded implementation of all officially supported compression tools such as compress, gzip, zip.
pigz (pig-zee) is a parallel implementation of gzip that suits well for the latest multi-processor, multi-core machines. By default, pigz breaks up the input into multiple chunks of size 128 KB, and compress each chunk in parallel with the help of light-weight threads. The number of compress threads is set by default to the number of online processors. The chunk size and the number of threads are configurable.
Compressed files can be restored to their original form using
-d option of
gzip tools. As per the man page, decompression is not parallelized out of the box, but may show some improvement compared to the existing old tools.
The following example demonstrates the advantage of using
gzip in compressing and decompressing a large file.
Original file, and the target hardware.
$ ls -lh PT8.53.04.tar -rw-r--r-- 1 psft dba 4.8G Feb 28 14:03 PT8.53.04.tar $ psrinfo -pv The physical processor has 8 cores and 64 virtual processors (0-63) The core has 8 virtual processors (0-7) ... The core has 8 virtual processors (56-63) SPARC-T5 (chipid 0, clock 3600 MHz)
$ time gzip --fast PT8.53.04.tar real 3m40.125s user 3m27.105s sys 0m13.008s $ ls -lh PT8.53* -rw-r--r-- 1 psft dba 3.1G Feb 28 14:03 PT8.53.04.tar.gz /* the following prstat, vmstat outputs show that gzip is compressing the tar file using a single thread - hence low CPU utilization. */ $ prstat -p 42510 PID USERNAME SIZE RSS STATE PRI NICE TIME CPU PROCESS/NLWP 42510 psft 2616K 2200K cpu16 10 0 0:01:00 1.5% gzip/1 $ prstat -m -p 42510 PID USERNAME USR SYS TRP TFL DFL LCK SLP LAT VCX ICX SCL SIG PROCESS/NLWP 42510 psft 95 4.6 0.0 0.0 0.0 0.0 0.0 0.0 0 35 7K 0 gzip/1 $ vmstat 2 r b w swap free re mf pi po fr de sr s0 s1 s2 s3 in sy cs us sy id 0 0 0 776242104 917016008 0 7 0 0 0 0 0 0 0 52 52 3286 2606 2178 2 0 98 1 0 0 776242104 916987888 0 14 0 0 0 0 0 0 0 0 0 3851 3359 2978 2 1 97 0 0 0 776242104 916962440 0 0 0 0 0 0 0 0 0 0 0 3184 1687 2023 1 0 98 0 0 0 775971768 916930720 0 0 0 0 0 0 0 0 0 39 37 3392 1819 2210 2 0 98 0 0 0 775971768 916898016 0 0 0 0 0 0 0 0 0 0 0 3452 1861 2106 2 0 98
$ time ./pigz PT8.53.04.tar real 0m25.111s <== wall clock time is 25s compared to gzip's 3m 27s user 17m18.398s sys 0m37.718s /* the following prstat, vmstat outputs show that pigz is compressing the tar file using many threads - hence busy system with high CPU utilization. */ $ prstat -p 49734 PID USERNAME SIZE RSS STATE PRI NICE TIME CPU PROCESS/NLWP 49734 psft 59M 58M sleep 11 0 0:12:58 38% pigz/66 $ vmstat 2 kthr memory page disk faults cpu r b w swap free re mf pi po fr de sr s0 s1 s2 s3 in sy cs us sy id 0 0 0 778097840 919076008 6 113 0 0 0 0 0 0 0 40 36 39330 45797 74148 61 4 35 0 0 0 777956280 918841720 0 1 0 0 0 0 0 0 0 0 0 38752 43292 71411 64 4 32 0 0 0 777490336 918334176 0 3 0 0 0 0 0 0 0 17 15 46553 53350 86840 60 4 35 1 0 0 777274072 918141936 0 1 0 0 0 0 0 0 0 39 34 16122 20202 28319 88 4 9 1 0 0 777138800 917917376 0 0 0 0 0 0 0 0 0 3 3 46597 51005 86673 56 5 39 $ ls -lh PT8.53.04.tar.gz -rw-r--r-- 1 psft dba 3.0G Feb 28 14:03 PT8.53.04.tar.gz $ gunzip PT8.53.04.tar.gz <== shows that the pigz compressed file is compatible with gzip/gunzip $ ls -lh PT8.53* -rw-r--r-- 1 psft dba 4.8G Feb 28 14:03 PT8.53.04.tar
$ time ./pigz -d PT8.53.04.tar.gz real 0m18.068s user 0m22.437s sys 0m12.857s $ time gzip -d PT8.53.04.tar.gz real 0m52.806s <== compare gzip's 52s decompression time with pigz's 18s user 0m42.068s sys 0m10.736s $ ls -lh PT8.53.04.tar -rw-r--r-- 1 psft dba 4.8G Feb 28 14:03 PT8.53.04.tar
Of course, there are other tools such as Parallel BZIP2 (PBZIP2), which is a parallel implementation of the
bzip2 tool are worth a try too. The idea here is to highlight the fact that there are better tools out there to get the job done in a quick manner compared to the existing/old tools that are bundled with the operating system distribution.
 Solaris 11+ : Upgrading SRU
Assuming the package repository is set up already to do the network updates on a Solaris 11+ system, the following commands are helpful in upgrading a SRU.
List all available SRUs in the repository.
# pkg list -af entire
Upgrade to the latest and greatest.
# pkg update
To find out what changes will be made to the system, try a dry run of the system update.
# pkg update -nv
Upgrade to a specific SRU.
# pkg update entire@<FMRI>
Find the Fault Managed Resource Identifier (FMRI) string by running
pkg list -af entire command.
Note that it is not so easy to downgrade SRU to a lower version as it may break the system. Should there be a need to downgrade or switch between different SRUs, relying on Boot Environments (BE) might be a good idea. Check Creating and Administering Oracle Solaris 11 Boot Environments document for details.
 Parallel NFS (pNFS)
Just a quick note — RFC 5661, Network File System (NFS) Version 4.1 introduced a new feature called "Parallel NFS" or pNFS, which allows NFS clients to access storage devices containing file data directly. When file data for a single NFS v4 server is stored on multiple and/or higher-throughput storage devices, using pNFS can result in significant improvement in file access performance. However Parallel NFS is an optional feature in NFS v4.1. Though there was a prototype made available few years ago when OpenSolaris was still alive, as of today, Solaris has no support for pNFS. Stay tuned for any updates from Oracle Solaris teams.
Here is an interesting write-up from one of our colleagues at Oracle|Sun (dated 2007) -- NFSv4.1's pNFS for Solaris.
(Credit to Rob Schneider and Tom Gould for initiating this topic)
 SPARC hardware : Check for and clear faults from ILOM
Couple of ways to check the faults using ILOM command line interface.
show faultycommand from ILOM command prompt, or
fmadm faultycommand from within the ILOM faultmgmt shell
Once found, use the
clear_fault_action property with the
set command to clear the fault for a FRU.
The following example checks for the faulty FRUs from ILOM faultmgmt shell, then clears it out.
-> start /SP/faultmgmt/shell Are you sure you want to start /SP/faultmgmt/shell (y/n)? y faultmgmtsp> fmadm faulty ------------------- ------------------------------------ -------------- -------- Time UUID msgid Severity ------------------- ------------------------------------ -------------- -------- 2014-02-26/16:17:11 18c62051-c81d-c569-a4e6-e418db2f84b4 PCIEX-8000-SQ Critical ... ... Suspect 1 of 1 Fault class : fault.io.pciex.rc.generic-ue Certainty : 100% Affects : hc:///chassis=0/motherboard=0/cpuboard=1/chip=2/hostbridge=4 Status : faulted FRU Status : faulty Location : /SYS/PM1 Manufacturer : Oracle Corporation Name : TLA,PM,T5-4,T5-8 ... Description : A fault has been diagnosed by the Host Operating System. Response : The service required LED on the chassis and on the affected FRU may be illuminated. ... faultmgmtsp> exit -> set /SYS/PM1 clear_fault_action=True Are you sure you want to clear /SYS/PM1 (y/n)? y Set 'clear_fault_action' to 'True'
Note that this procedure clears the fault from the SP but not from the host.
More 80s. Enjoy.
Audio-Visual material courtesy: YouTube. Other information: Wikipedia.
1. Ray Parker, Jr. - Ghostbusters (1984)
Featured in Ghostbusters movie.
2. Chris DeBurgh - Lady In Red (1986)
Not the official video [apparently]. Has nothing to do with the woman in red in The Matrix.
3. Wang Chung - Everybody Have Fun Tonight (1986)
Enjoyed #2 position on the Billboard Hot 100 singles back then.
4. Spandau Ballet - True (1983)
Enjoyed #4 position on the Billboard Hot 100 singles list in the autumn of 1983.
5. Love and Rockets - So alive (1989)
#1 on the Billboard Modern Rock Tracks chart for 5 weeks.
6. John Mellencamp - Hurts So Good (1982)
Another Billboard Hot 100 single in this playlist.
7. Rush- Tom Sawyer (1981)
Featured in numerous hollywood movies, and american telivision shows.
8. After The Fire - Der Kommissar (1982)
Cover for a German song — in English.
9. Midnight Oil - Beds Are Burning (1987)
One Hit Wonder.
10. ZZ Top - Sharp Dressed Man (1983)
Cause every girl is crazy 'bout a sharp dressed man. Really!?
Labels: 80s music playlist
 Mounting NFS on Solaris 10 and later
With a relevant entry in /etc/vfstab, the general expectation is that Solaris automatically mounts the NFS shares upon a system reboot. However users may find that NFS shares are not being auto-mounted on some of the systems running the latest update of Solaris 10 or 11. One reason for this behavior could be the use of the Secure By Default network profile, which was introduced in Solaris 10 11/06. When this networking profile is in use, numerous services including the NFS client service are disabled. For the automounting of NFS shares, we will need the NFS client service running.
The fix is to enable NFS client service along with its dependencies.
# svcs -a | grep nfs\/client disabled Jan_17 svc:/network/nfs/client:default # svcadm enable -r svc:/network/nfs/client # svcs -a | grep nfs\/client online Jan_20 svc:/network/nfs/client:default
On a similar note, if you want all default services to be enabled as they were in previous Solaris releases, run the following command as privileged user. Then use
svcadm(1M) to disable unwanted services.
# netservices open
To switch back to the secure by default profile, run:
# netservices limited
 Utility to manage Sun Flash Accelerator F40 PCIe card(s) ..
The Sun Flash Accelerator F40 PCIe Card has two sets of firmware — NAND flash controller firmware, and SAS controller firmware (host PCIe to SAS controller). Both firmware sets are updated as a single F40 firmware package using the
ddcli utility. This utility can be used to locate and display information about the cards in the system, format the cards, monitor the health and extract smart logs (to assist Oracle support in debugging and resolution) for a selected F40 card.
ddcli utility is not available on systems where the F40 PCIe cards are installed, install patch "16005846: F40 (AURA 2) SW1.1 Release fw (08.05.01.00) and cli utility update" or later version, if available. This patch can be downloaded from support.oracle.com
ddcli utility can be used to service and monitor the health of Sun Flash Accelerator F80 PCIe cards too. Install patch "Patch 17860600: SW1.0 for Sun Flash Acccelerator F80" to get access to the F80 card software package.
Permission denied error when changing a password
An attempt to change the password for a local user 'XYZ' fails with
Permission denied error.
# passwd XYZ New Password: ******** Re-enter new Password: ******** Permission denied # grep passwd /etc/nsswitch.conf passwd: files ldap
Users have the flexibility to include and access password information in/from multiple repositories such as
ldap. Per the man page of
passwd(1), when a user has a password stored in one of the name services as well as a local files entry, the
passwd command tries to update both. It is possible to have different passwords in the name service and local files entry. Use
passwd -r to change a specific password repository.
Hence the fix is to use the
-r option in this case to ignore the nsswitch.conf file sequence and update the password information in local /etc files — /etc/passwd and /etc/shadow files.
# passwd -r files XYZ New Password: ******** Re-enter new Password: ******** passwd: password successfully changed for oracle
 Microstate statistics for any process
ptime -m shows the full set of microstate accounting statistics for the lifetime of a given process.
prstat -m also reports the microstate process accounting information, but the displayed statistics are accumulated since last display every interval seconds.
# prstat -p 39235 PID USERNAME SIZE RSS STATE PRI NICE TIME CPU PROCESS/NLWP 39235 psft 3585M 3320M sleep 59 0 2:23:11 0.0% java/257 # prstat -mp 39235 PID USERNAME USR SYS TRP TFL DFL LCK SLP LAT VCX ICX SCL SIG PROCESS/NLWP 39235 psft 0.0 0.0 0.0 0.0 0.0 87 13 0.0 0 0 1 0 java/257 # ptime -mp 39235 real 428:31:25.902644700 user 2:06:32.283801209 sys 16:37.056999418 trap 2.250539737 tflt 0.000000000 dflt 2.018347218 kflt 0.000000000 lock 96013:52:37.184929717 slp 14349:50:02.286168683 lat 3:11.510473038 stop 0.002468763
In the above example,
java process with pid 39235 spent most of its time sleeping waiting to acquire locks in user space (ref: 'lock' field). It also spent a lot of time in just sleeping waiting for some work (ref: 'slp' field). User CPU time is the next major one (ref: 'user' field). The process spent a little bit of time in system space (ref: 'sys' field), waiting for CPU (ref: 'lat' field) and almost negligible amount of time in processing system traps (ref: 'trap' field) and in servicing data page faults (ref: 'dflt' field).
 ZFS : metaslab utilization
ZFS divides the space on each device (virtual or physical) into a number of smaller, manageable regions called metaslabs. Each metaslab is associated with a space map that holds information about the free space in that region by keeping tracking of space allocations and deallocations.
The following sample outputs show that a virtual device, u01, made up of two physical disks has 139 metaslabs. The number of segments and free/available space in each metaslab is also shown in those outputs.
# zpool list u01 NAME SIZE ALLOC FREE CAP DEDUP HEALTH ALTROOT u01 1.09T 133G 979G 11% 1.00x ONLINE - # zpool status u01 pool: u01 state: ONLINE scan: none requested config: NAME STATE READ WRITE CKSUM u01 ONLINE 0 0 0 mirror-0 ONLINE 0 0 0 c0t5000CCA01D1DD4A4d0 ONLINE 0 0 0 c0t5000CCA01D1DCE88d0 ONLINE 0 0 0 errors: No known data errors # zdb -m u01 Metaslabs: vdev 0 ms_array 27 metaslabs 139 offset spacemap free --------------- ------------------- --------------- ------------- metaslab 0 offset 0 spacemap 30 free 4.65M metaslab 1 offset 200000000 spacemap 32 free 698K metaslab 2 offset 400000000 spacemap 33 free 1.25M metaslab 3 offset 600000000 spacemap 35 free 588K .. .. metaslab 62 offset 7c00000000 spacemap 0 free 8G metaslab 63 offset 7e00000000 spacemap 45 free 8.00G metaslab 64 offset 8000000000 spacemap 0 free 8G ... ... metaslab 136 offset 11000000000 spacemap 0 free 8G metaslab 137 offset 11200000000 spacemap 0 free 8G metaslab 138 offset 11400000000 spacemap 0 free 8G # zdb -mm u01 Metaslabs: vdev 0 ms_array 27 metaslabs 139 offset spacemap free --------------- ------------------- --------------- ------------- metaslab 0 offset 0 spacemap 30 free 4.65M segments 1136 maxsize 103K freepct 0% metaslab 1 offset 200000000 spacemap 32 free 698K segments 64 maxsize 118K freepct 0% metaslab 2 offset 400000000 spacemap 33 free 1.25M segments 113 maxsize 104K freepct 0% metaslab 3 offset 600000000 spacemap 35 free 588K segments 109 maxsize 28.5K freepct 0% ... ...
What is the purpose of this topic? Just to introduce the ZFS debugger, zdb (check the man page
zdb(1M)) to the power-users who would like to dig a little deep to find answers to tough questions such as if a ZFS filesystem is fragmented.
Keywords: ZFS zdb metaslab "space map"
Roles can not login directly error on Solaris 11 and later
root account in Solaris 11 is a role. A role is just like any other user account with the exception that users with roles cannot login directly. Here is an example that shows the failure when attempted to connect directly.
login: root Password: ******** Roles can not login directly
In this example, connecting as a normal user (who have no roles assigned) and then using
su to connect as
root user would succeed. This additional step is to prevent malevolent users from getting away with no accountability. Check Bart's blog post SPOTD: The Guide Book to Solaris Role-Based Access Control for some relevant information.
If security is not a primary concern, and if connecting directly as root user is desirable, simply change the
root role into a user.
# rolemod -K type=normal root
This change does not affect all the users who are currently in the
root role — they retain the
root role. Other users who have root access can
su to root or log in to the system as the
root user. To remove the
root role assignment from other local users, set the role to an empty string using
usermod command as shown in the following example.
/* assign root role to user 'giri' */ # usermod -R root giri # roles giri root /* remove the role from user 'giri' */ # usermod -R "" giri #
Keywords: RBAC, roles
 Large volume sizes (> 2 TB), and maximum size of UFS filesystem
As per the Solaris System Administration Guide, the maximum size of a UFS filesystem is ~16 TB.
To create a UFS file system greater than 2 TB, use EFI disk label. The EFI label provides support for physical disks and virtual disk volumes that are greater than 2 TB in size. Refer to the disk management section in Solaris System Administration Guide to find out the advantages and limitations of EFI.
Note that ZFS labels disks with an EFI label when creating a ZFS storage pool (zpool). And users in general need not be too concerned about the maximum size of a ZFS filesystem as it is several times larger than the maximum size supported by the UFS filesystem.
powertop to observe the CPU power management
powertop was ported to Solaris and available as an add-on package from unofficial sources for the past few years, recent releases of Solaris bundled this tool with the core distribution.
powertop can be used to monitor the effectiveness of CPU power management features on systems running Solaris. It also displays the clock frequently at which the CPU is operating along with the top events that are causing the CPU to wake up and use more energy.
Be aware that when the CPU power management is enabled with the elastic policy in effect (default on Solaris 11 and later), the CPUs on the system are susceptible to CPU throttling under certain conditions either to conserve power or to reduce the amount of heat generated by the chip. In other words, based on the load on the system, the frequency of a microprocessor can be automatically adjusted on the fly. This is referred as "CPU dynamic voltage and frequency scaling" (DVFS). Monitoring the output of
powertop is one way to monitor the frequency levels of the processor on a busy system in order to minimize any performance related surprises. Set the power management policy to performance, if letting CPUs run at full speed all the time is desired. Performance policy effectively disables the CPU power management.
Power management settings can be controlled from the Service Processor's (SP) Integrated Lights Out Manager (ILOM) command line interface or browser user interface.
The following sample is gathered from an idle SPARC T5-8 server where the CPU power management was disabled.
Solaris PowerTOP version 1.3 Idle Power States Avg Residency Frequency Levels C0 (cpu running) (0.1%) 500 Mhz 0.0% C1 4.7ms (99.9%) 800 Mhz 0.0% 933 Mhz 0.0% 1067 Mhz 0.0% 1200 Mhz 0.0% .. .. 3200 Mhz 0.0% 3333 Mhz 0.0% 3467 Mhz 0.0% 3600 Mhz 100.0% Wakeups-from-idle per second: 109818.7 interval: 5.0s no power usage estimate available Top causes for wakeups: 94.4% (103630.7) sched : <xcalls> unix`dtrace_sync_func 3.1% (3352.8) OPMNPing : <xcalls> unix`setsoftint_tl1 1.1% (1155.6) sched : <xcalls> unix`setsoftint_tl1 0.4% (401.2) <kernel> : genunix`pm_timer 0.3% (317.0) sched : <xcalls> 0.2% (251.8) <kernel> : genunix`lwp_timer_timeout 0.2% (204.4) sched : <xcalls> unix`null_xcall 0.1% (100.2) <kernel> : genunix`clock 0.1% ( 65.6) <kernel> : genunix`cv_wakeup 0.0% ( 50.2) <kernel> : SDC`sysdc_update 0.0% ( 46.8) <interrupt> : mcxnex#0 0.0% ( 39.6) opmn : <xcalls> unix`setsoftint_tl1 0.0% ( 36.6) opmn : <xcalls> 0.0% ( 36.4) opmn : <xcalls> unix`vtag_flushrange_group_tl1 0.0% ( 21.6) <interrupt> : ixgbe#0 ... ... Suggestion: enable CPU power management using poweradm(1m) Q - Quit R - Refresh (CPU PM is disabled)
Bond prices and bond yields are inversely related — rising bond prices means lower yields, and falling bond prices imply higher yields.
When sold initially at auction by the US Treasury department, treasury notes or bonds will have a fixed face value and fixed interest rate. In the context of treasury bonds, the interest rate is usually referred as coupon rate, coupon percent rate or simply coupon.
Similar to stocks, bonds are resold on the open market or secondary market. Demand for those treasury bonds may push the price higher and the yield lower. The reason for the lower yield being upon maturity, treasury pays back just the face value along with the pre-determined interest rate. The current yield for any treasury bond can can be calculated as shown below.
Actual Annual Interest Current yield = ---------------------- * 100 Current Market Value
For example, if a treasury bond with a face value of $100 and an interest rate 3% was sold at a premium price for $101 due to demand, the current yield will be (3/101) * 100 = 2.97%
Implication of Treasury Yields:
Listed below are some high-level implications of the rising or falling treasury yields.
Rise in treasury yields may:
push the interest rate upwards on fixed-length mortages and loans with similar lengths. In other words, rise in treasury yields hurt borrowers by driving up the borrowing costs making longer-term loans such as housing, car loans less affordable. On the other hand, savers benefit by the rise in interest rates.
pose a threat to Governments with huge national debt by increasing the interest payments on that debt.
increase the value of the world's reserve currency — the US dollar as of today, which could attract foreign investment. As the returns on US dollar increase, the demand for US dollar grows worldwide.
negatively impact stock markets as investors may move out of those risky assets to less risky assets such as bonds
negatively impact precious metals such as Gold. The general theory is that since the returns on precious metals mainly depend on the demand for those metals, rise in bond yields and a subsequent strengthned US dollar make investing in precious metals less attractive.
Drop in treasury yields usually will have inverse effect of the rise in treasury yields. For example, drop in treasury yields may lead to decreased interest rates, which in turn may encourage borrowing and the resulting cash flow can result in real estate boom on the positive side, and can cause the inflation to go up on the negative side. Inflation is the rise in the prices of goods and services over time. Rise in interest rates in a inflation ridden nation may make things worse.
Note that the impact can be felt when there is a sudden and noticeable movement in yields in either direction. Once stabilized, people may get used to the new normal, and some of the things may go back to the way there were. For example, sudden upward surge in treasury yields may drive investors away from Gold - but once the knee-jerk reaction subsides, investors may return and continue trading Gold. After all, Gold is a precious metal with lots of demand worldwide.
Source: various including Investopedia