US: Bond yields and more proactive rate hike views


The situation of bond yields has gone beyond the standard March rate hike expectations. The 10-year US Treasury yields are at 1.88%, the highest level in the last two years. Rising inflation concerns have highlighted the Fed’s more proactive approach to taking the initiative, proactively suggesting that the Fed could start off with a 50 basis point rate hike instead of the standard 25 basis points. In fact, it should start.. This is about taking control in the fight against inflation.. The Fed has not been doing this since 2000.

As with the fight against inflation, such a tight tightening is likely to cause more shocks to developing countries. For example, China. Unlike many core economies, China aims to raise the growth scale with rate cuts. In his Davos speech, Chinese President Xi Jinping stated that countries should not increase interest rates too quickly, and that if this is done, the global economy, which is in the recovery phase, may suffocate. While China will be disturbed by the Fed’s rapid rate hike, the United States will complain about the PBOC’s rate cuts. While China is considering its growth, the US will blame China for the low exchange rate.

With the Fed’s fight against inflation coming to the fore, the movement in interest rates will be in another dimension. The balance sheet signal on January 26 may push these speculation effects.

Kaynak: Tera Yatırım
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