Bond Yields Typically Rise After a Rate Hike Cycle Begins
The Federal Reserve is expected to raise interest rates by 0.25 percentage points, marking the first hike since July 2023 and potentially starting a new hiking cycle. This move could increase borrowing costs for homebuyers and make government debt more attractive than stocks, which may weigh on U.S. equities in the near term. Historically, bond yields tend to rise during rate hike cycles by an average of about 1.14 percentage points within a year after initiation. Deutsche Bank analysts suggest this cycle might be less aggressive due to already high starting rates and could result in more modest yield increases—around seven-tenths of a point over the next year. The only exception where yields fell during the first year of a hiking cycle was in 2004, according to a Deutsche Bank report. Analysts remain cautious but note potential for less dramatic outcomes this time around.
Topics: bond yields Federal Reserve rate hike cycle Treasury market