It is no secret that the past year has been an absolutely horrible one for holders of U.S. Treasurys. Exhibit 1 in the report shows just how bad it has been relative to history, with the two-year drawdown on Treasurys being by far the worst since at least 1975. The culprit has, of course, been the much higher-than-expected inflation and the Fed’s response to it, with the fastest tightening cycle since at least 1970.
In this Economics Weekly, we take a look at the long end of the Treasury bond market, what happens with yields around recessions, and where yields might end up over the medium term.
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Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.