US Treasury yields climbed at the end of the week as markets analyzed the eventual impact of the Federal Reserve’s most recent rate hike. Specifically, the 2-Year Treasury note reached up to its highest mark in 15 years, as Fed officials decide how to proceed I the months to come.
The 2-year Treasury note is easily influenced by policy so its 15-year record-high of 4.266 percent—earlier in the session—could easily be manipulated by the decisions the agency makes regarding future fiscal policy. In fact, after reaching that peak early in the session, it had quickly settled down, again, to 4.18 percent.
In addition the yield on the 10-year note managed to clamor up to an 11-year high of 3.829 percent. This was also a mark hit earlier in the session to rest a little lower, trading flat at 3.713 percent.
For reference, prices move in the opposite direction as yields, at a ratio of one yield basis point equaling 0.1 percent in price.
Analysts advise the Treasury yield climb came after the Federal Reserve released its updated policy decision. The announcement signaled the central bank’s willingness to accept the pending recession—by issuing another rate hike—if it will, indeed, help curb inflation.
Thus, the Fed issued a substantial interest rate hike of 75 basis points, on Wednesday. This was certainly a message that signaled their intention to remain aggressive in their efforts to fight inflation. Overall, it bumped interest rates up to 4.4 percent by the end of this year, and then again up to 4.6 percent by the end of next year (2023). On top of that, global banks took this as an invitation issue their own, equivalently substantial, rate hikes.
Unfortunately, experts seem to think that even though this rate hike is already pretty large, there is a very good chance at least another one is coming. There is a somewhat good chance, for example, that the 10-year Treasury yield will bounce back up again, and touch 4 percent, at least. If that weren’t enough many analysts caution that this will not only continue to steepen the inverted yield curve—which suggests a pending recession—but also that short-term rates being notably higher than long-term rates further signal economic downturn.
