How does a hike in interest rate results in drop in yields of treasuries?

My understanding was that when interest rate rises, investors would sell-off bonds, which would result in increase in yields.

enter image description here


1 Answer 1


What happened was that the Fed indeed hiked by 25bp (as expected) but also conveyed the message that future hikes would be quite gradual (this was not expected). The market therefore altered its expected path of Fed funds downwards and hence the yield of Treasuties downwards. It's all about what happened versus previous expectations.


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.