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BNP Paribas sees U.S. Treasury yields rising on expectations of three Fed hikes from December

The bank said investors may keep questioning the Federal Reserve's credibility after it held rates steady last week despite three dissenting votes favoring an increase.

Summary

BNP Paribas expects U.S. Treasury yields to continue climbing as markets price in further Federal Reserve tightening. The bank forecasts three interest-rate hikes starting in December and argues that last week's decision to leave rates unchanged, despite three dissenting votes backing a hike, is likely to keep investors focused on the Fed's credibility. Higher Treasury yields typically reflect expectations that policy rates will remain higher for longer or move up further.

Terms & Concepts
  • U.S. Treasury yields: Returns investors earn on U.S. government bonds
  • Federal Reserve: U.S. central bank that sets monetary policy
  • interest-rate hikes: Central bank increases in benchmark borrowing costs