Three months ago, in the week before the Federal Reserve’s first rate cut in the current cycle, the bond market was pricing in a two-year yield of 3.58%. The two-year yield has since risen to 4.23%, an increase of 65 basis points at a time when the Fed is cutting interest rates. Two-year yields are ... READ MORE >
Treasury yields
Inflation risk premium suggests higher yields ahead
As the yield on the 10-year Treasury advances toward 4.5%—which is our baseline forecast for next year—the inflation risk premium is supporting that move. The inflation risk premium is the compensation that investors demand for the possibility that inflation may rise, or fall, and that premium is ... READ MORE >
Morning market minute: Return of the term premium on Treasury notes
The yield on the 10-year Treasury is trading near 4.20%, which was the RSM year-end target, and has averaged 4.18% for the year through Dec. 3. And the yields are set to go higher. An economy with growth that could approach 3% with full employment, coupled with expectations of expansionary fiscal ... READ MORE >
Interest rate update: Recent increase shows progress on the path to normalization
The yield on 10-year Treasury bonds is approaching 1.7%, within 20 basis points of already low pre-pandemic rates. The recent increase in the 10-year is in response to signs of an economic recovery and perceived risks around higher inflation. But sub-2% interest rates on the 10-year Treasury are far ... READ MORE >
American peak growth? Here is some much-needed context
One of the stories driving conversation today in financial markets, especially among fixed-income participants, is the idea that U.S. growth has peaked and that is why bond yields have declined recently. This is a discussion in need of some context that considers the long-run sustainable pace of ... READ MORE >
CHART OF THE DAY: 10-year Treasury yield pushes above 1%
It’s been an eventful first few days of trading in the new year. Most notably, the yield on 10-year Treasuries moved above 1% for the first time since the economic collapse in March, and following the runoff elections in Georgia on Tuesday that gave control of the Senate to Democrats. Yields broke past ... READ MORE >