The Federal Reserve’s recent 25 basis-point rate hike is leading to higher yields on Treasury notes, with the 2-year Treasury yield hitting a high not seen since 2006 and the 10-year yield surpassing the 4% mark for the first time since early November. The yield on the 2-year Treasury rose to levels not seen in almost seventeen years as investors pondered further Fed rate hikes. The 10-year Treasury yield increased by more than 3 basis points to 4.028%.<\/p>\n
The Fed fund futures are pricing in the Fed’s target rate to peak around 5.42% in September, up from the current 4.50-4.75%. This is in response to the increasing ‘higher-for-longer’ rates view, following the higher-than-expected US data this month. <\/p>\n
The yield on two-year bonds increased to 4.72%, and the yield on 30-year bonds rose to Meanwhile, the 2-year yield climbed slightly to 4.801% after reaching its highest level since November on Monday. Prices and yields move in opposite directions.[0]<\/a><\/sup><\/p>\n Fed officials have indicated that further rate hikes are on the horizon, especially in light of stubbornly high inflation rates.[1]<\/a><\/sup> Atlanta Fed President Raphael Bostic said he believes rates will need to go higher still and remain elevated “well into 2024” as the battle with inflation continues.[1]<\/a><\/sup> Minneapolis Fed President Neel Kashkari has also indicated that he is open to either a 25 or 50 basis point increase at this month’s policy meeting.<\/p>\n It is worth noting that yields and prices have an inverted relationship, with one basis point equalling 0.01%.[2]<\/a><\/sup> This means that as yields increase, prices decrease.[3]<\/a><\/sup> <\/p>\n The Fed has raised its policy rate eight times since March 2022, most recently to a range of 4.5%-4.75% on Feb. 1.[4]<\/a><\/sup> It is mostly expected to take its fed-funds rate target to a cycle peak of between 5.25% and 5.50%, or higher, by September.<\/p>\n It is clear that the Fed is not going to pause and will hike again at its March 22nd meeting.[5]<\/a><\/sup> As a result, investors must be prepared for an increase in interest rates and the potential for a half-point increase, rather than the usual quarter-point increase.<\/p>\n 0. <\/span>“10-year Treasury yield briefly hits highest level since November” CNBC, 28 Feb. 2023, https:\/\/www.cnbc.com\/2023\/02\/28\/treasury-prices-fall-slightly-to-close-out-bumper-month-for-yields.html<\/a><\/a><\/p>\n 1. <\/span>“Ten-year Treasury yields move further above 4%” msnNOW, 2 Mar. 2023, https:\/\/www.msn.com\/en-us\/money\/markets\/ten-year-treasury-yields-move-further-above-4percent\/ar-AA1886ES<\/a><\/a><\/p>\n 2. <\/span>“2-year Treasury Yield Attains 17-year High amid Sustained Fed Rate Hikes” Coinspeaker, 2 Mar. 2023, https:\/\/www.coinspeaker.com\/2-year-treasury-yield-17-year-high\/<\/a><\/a><\/p>\n 3. <\/span>“@theMarket: Bond Yields Weighing on Stocks” iBerkshires.com, 24 Feb. 2023, https:\/\/www.iberkshires.com\/blog\/Bill_Schmick\/4337\/-theMarket-Bond-Yields-Weighing-on-Stocks.html<\/a><\/a><\/p>\n 4. <\/span>“Entire Treasury Market Yields at Least 4%, Now Including 30-Year” Yahoo Finance, 2 Mar. 2023, https:\/\/finance.yahoo.com\/news\/entire-treasury-market-yields-least-140336909.html<\/a><\/a><\/p>\n 5. <\/span>“Analysis | Bond Yields are Jumping at Federal Reserve Phantom Shadows” The Washington Post, 24 Feb. 2023, https:\/\/www.washingtonpost.com\/business\/bond-yields-are-jumping-at-federal-reserve-phantom-shadows\/2023\/02\/22\/26d8ff08-b2a7-11ed-94a0-512954d75716_story.html<\/a><\/a><\/p>\n","protected":false},"excerpt":{"rendered":" The Federal Reserve’s recent 25 basis-point rate hike is leading to higher yields on Treasury notes, with the 2-year Treasury yield hitting a high not seen since 2006 and the 10-year yield surpassing the 4% mark for the first time since early November. The yield on the 2-year Treasury rose to levels not seen in almost seventeen years as investors pondered further Fed rate hikes. The 10-year Treasury yield increased by more than 3 basis points to 4.028%.<\/p>\n The Fed fund futures are pricing in the Fed’s target rate to peak around 5.42% in September, up from the current 4.50-4.75%. This is in response to the increasing ‘higher-for-longer’ rates view, following the higher-than-expected US data this month. <\/p>\n The yield on two-year bonds increased to 4.72%, and the yield on 30-year bonds rose to Meanwhile, the 2-year yield climbed slightly to 4.801% after reaching its highest level since November on Monday. Prices and yields move in opposite directions.[0]<\/a><\/sup><\/p>\n Fed officials have indicated that further rate hikes are on the horizon, especially in light of stubbornly high inflation rates.[1]<\/a><\/sup> Atlanta Fed President Raphael Bostic said he believes rates will need to go higher still and remain elevated “well into 2024” as the battle with inflation continues.[1]<\/a><\/sup> Minneapolis Fed President Neel Kashkari has also indicated that he is open to either a 25 or 50 basis point increase at this month’s policy meeting.<\/p>\n It is worth noting that yields and prices have an inverted relationship, with one basis point equalling 0.01%.[2]<\/a><\/sup> This means that as yields increase, prices decrease.[3]<\/a><\/sup> <\/p>\n The Fed has raised its policy rate eight times since March 2022, most recently to a range of 4.5%-4.75% on Feb. 1.[4]<\/a><\/sup> It is mostly expected to take its fed-funds rate target to a cycle peak of between 5.25% and 5.50%, or higher, by September.<\/p>\n It is clear that the Fed is not going to pause and will hike again at its March 22nd meeting.[5]<\/a><\/sup> As a result, investors must be prepared for an increase in interest rates and the potential for a half-point increase, rather than the usual quarter-point increase.<\/p>\n 0. <\/span>“10-year Treasury yield briefly hits highest level since November” CNBC, 28 Feb. 2023, https:\/\/www.cnbc.com\/2023\/02\/28\/treasury-prices-fall-slightly-to-close-out-bumper-month-for-yields.html<\/a><\/a><\/p>\n 1. <\/span>“Ten-year Treasury yields move further above 4%” msnNOW, 2 Mar. 2023, https:\/\/www.msn.com\/en-us\/money\/markets\/ten-year-treasury-yields-move-further-above-4percent\/ar-AA1886ES<\/a><\/a><\/p>\n 2. <\/span>“2-year Treasury Yield Attains 17-year High amid Sustained Fed Rate Hikes” Coinspeaker, 2 Mar. 2023, https:\/\/www.coinspeaker.com\/2-year-treasury-yield-17-year-high\/<\/a><\/a><\/p>\n 3. <\/span>“@theMarket: Bond Yields Weighing on Stocks” iBerkshires.com, 24 Feb. 2023, https:\/\/www.iberkshires.com\/blog\/Bill_Schmick\/4337\/-theMarket-Bond-Yields-Weighing-on-Stocks.html<\/a><\/a><\/p>\n 4. <\/span>“Entire Treasury Market Yields at Least 4%, Now Including 30-Year” Yahoo Finance, 2 Mar. 2023, https:\/\/finance.yahoo.com\/news\/entire-treasury-market-yields-least-140336909.html<\/a><\/a><\/p>\n 5. <\/span>“Analysis | Bond Yields are Jumping at Federal Reserve Phantom Shadows” The Washington Post, 24 Feb. 2023, https:\/\/www.washingtonpost.com\/business\/bond-yields-are-jumping-at-federal-reserve-phantom-shadows\/2023\/02\/22\/26d8ff08-b2a7-11ed-94a0-512954d75716_story.html<\/a><\/a><\/p>\n","protected":false},"author":3,"featured_media":1636,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[47],"tags":[],"_links":{"self":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1637"}],"collection":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/comments?post=1637"}],"version-history":[{"count":0,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/posts\/1637\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media\/1636"}],"wp:attachment":[{"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/media?parent=1637"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/categories?post=1637"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/embarrdowns.com\/wp-json\/wp\/v2\/tags?post=1637"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}