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The aBP Weekly: The Fed Rate Hike Is Here. Now 5% Treasury Yields Are the Market's Next Test

Writer: Felix Ouma
Felix Ouma
Sep 19
6 min read

Summary

  • The Federal Reserve raised interest rates by 25 bps, taking the federal funds target range to 3.75% to 4.00% as policymakers responded to persistent inflation and an economy that continues to show resilience.

  • The bond market may be an even bigger story than the Fed rate hike. The 10 year Treasury yield reached 5% during the week, increasing borrowing costs and raising the hurdle rate investors use when valuing equities.

  • The U.S. consumer continues to complicate the monetary policy outlook. August retail sales increased 1.2% MoM and 6.0% YoY, providing further evidence that economic activity remains strong enough to withstand restrictive monetary policy.

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  • Markets proved surprisingly resilient. The Nasdaq gained 0.7% for the week despite higher rates, while the S&P 500 slipped only 0.1%. Strong corporate earnings and continued enthusiasm around technology helped offset pressure from bonds and oil.

5% YIELDS WHAT NEXT? over The Treasury building with a bold upward arrow, suggesting rising rates and uncertainty.
Source: Business First AM

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