Bond investors bet on interest-rate rises
The yield on ten-year US Treasury bonds has risen above 2% for the first time since 2019 as investors bet interest rates will continue to rise.

Bond markets think central banks are about to get tough. The yield on the benchmark ten-year US Treasury bond has risen above 2% for the first time since 2019 following this week’s data showing that US inflation hit 7% in December. Investors are betting that the Federal Reserve will be forced to raise interest rates seven times this year to get price rises under control.
Typically, investors demand higher yields for holding bonds that mature further in the future: the US two-year Treasury pays less than 1.6%, compared with 2% for the ten-year, say Davide Barbuscia and David Randall on Reuters. However, “yields of short-term US government debt have been rising fast this year, reflecting expectations of a series of rate hikes” while “longer-dated government bond yields have moved at a slower pace”. Hence the gap between the yield on short- and long-duration bonds has been falling. This trend – referred to as the yield curve “flattening” – implies that investors think tighter monetary policy will lead to slower growth.
So far, the bond sell-off has been “relatively broad and orderly”, says Marcus Ashworth on Bloomberg. Investors are starting to distinguish between classes of bonds again: riskier bonds have seen their yields rise more than safer government bonds. “Italy’s yield premium to Germany… is at the widest for more than a year.”
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Still, last year was the global bond market’s worst since 1999, says Mark Tinker in the Australian Financial Review. The start of 2022 has also been “absolutely terrible”. After years of almost free central bank money and expectations of low inflation, the market is now being forced to reprice. Inflation is soaring and central banks are preparing to sell some of their bond holdings. “The question for long-term investors… has to be ‘why own any bonds at all?’.”
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Hargreaves Lansdown slashes fees for ISA and SIPP investors - how does it compare to other providers?
Hargreaves Lansdown, the UK’s biggest investment platform, has dropped its fees by 40%, to their lowest ever level, for certain customers. Is it a good deal, and how does it compare to other providers?
By Ruth Emery
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
By Matthew Lynn
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
By Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
By Peter Walls
-
Falling revenues and mounting debt spell trouble for Jumia Technologies
Struggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
By Dr Matthew Partridge
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?
Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
By Dr Matthew Partridge
-
Best of British bargains: cash in on undervalued companies in the UK stock market
Opinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
By Michael Field
-
Building firm Keller presents low debt and ample scope for growth
Geotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
By Dr Mike Tubbs
-
PZ Cussons share price down 75% in last decade – why it's one to watch
Opinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
By Jamie Ward
-
Cash in on the biotech sector with specialist trust BioPharma
Opinion BioPharma has an attractive niche in lending to asset-rich biotechnology companies
By Rupert Hargreaves