What Is Driving Longer-Term Interest Rates Higher?

2025-01-10 05:05:00 ET

Summary

• One cause cited for the rise in longer-term interest rates is the return of the "bond vigilantes."
• Another variable impacting bond yields is the fact inflation is not entirely under control or may not be under control.
• By a small amount, the economic data is coming in better than expected, so possibly the higher bond rates are more to do with a strengthening economy than the so-called bond vigilantes.

Just as the Fed began reducing the Fed Funds rate in September last year, longer-term interest rates as measured by the 10-year U.S. Treasury began moving higher. In mid-September, the 10-year U.S. Treasury yield equaled 3.61% and has now reached 4.68%. Commensurate with an increase in yields, bond prices fall, since a bond's price moves in the opposite direction of the move in interest rates....

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