Graphic content – March; Federal Reserve hike means Treasury sell-off? Actually, historically, quite the opposite.

Mike Riddell
Written by

14th March 2017

The chart below‎ demonstrates the change in US 10-year Treasury yields in the run-up to a Federal Reserve (Fed) hike, and what then happens in the weeks afterwards. This covers the 70 Fed hikes over the last 37 years.

Average 10 Year US Treasury Yields

Click graph to enlarge 

In the run-up to a Fed hike, US yields tended to rise. This is no surprise, considering that markets will have tended to price in an increasing probability of a hike ahead of an actual Fed hike. On average, yields rose 18 basis points from three weeks before the hike to the actual hike itself. This time is no different, with US 10-year yields rising 17 basis points over the last three weeks.

But interestingly, in the weeks after a hike bonds have tended to rally, with the average fall in 10-year yields being three basis points. The hit rate is also high – 10-year yields fell 70% of the time‎.


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