A Deep Dive On The Recent Spike In U.S. Treasury Yields
2025-01-14 07:58:00 ET
Summary
- U.S. Treasury yields have increased noticeably since September, particularly at the long end of the curve.
- Most of the recent jump in rates is driven by an increase in the term premium. We estimate that the higher-for-longer narrative has been the key driver, with investors forced to reconsider the possibility of not just a more gradual cutting cycle, but the risk of U.S. Federal Reserve (Fed) rate hikes in the year ahead.
- We don’t believe the Fed will hike rates in 2025, as we don’t see strong evidence for a reacceleration in inflation.
- We do believe the big backup in yields is starting to make bonds more attractive again.
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