Federal Reserve interest rate hike may trigger another brutal move for US Treasury yields

Federal Reserve interest rate hike may trigger another brutal move for US Treasury yields

Brian Sozzi · Executive Editor

Thu, September 17, 2026 at 1:31 PM GMT+3 2 min read

• ^TNX +1.03%

More pain may be in store for the bond market at the hands of the Fed's fresh interest rate hike if history is any guide.

Think 6% on the US Treasury yield, up from the already worrying level of 5% today.

Historically, the 10-year US Treasury yield (^TNX) has risen about 50 basis points on average in the first six months after the Fed began hiking rates, across tightening cycles since 1963, per analysis by strategists at The Kobeissi Letter.

Over the following 12 months, the average increase in yields reached roughly 110 basis points.

If this trend materializes again, the 10-year yield would surpass 6.0% next year for the first time since August 2000.

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In the most extreme cases, the strategists found, the 10-year yield increased by up to 400 basis points over the 12 months following the initial rate hike. On the other hand, some declines of up to 70 basis points were also recorded during the same period.

"More US Treasury intervention is likely coming," the strategists said, pointing to recent actions from the Secretary Bessent-led Treasury to buy bonds to cool the rise in yields. The move hasn't worked, and yields last week eclipsed the often worrying-for-stocks level of 5%.

Read more: How soaring Treasury yields could hit your finances

The decision by the Fed to lift rates on Wednesday comes as sticky inflation readings — from the CPI to PPI — and rising energy costs force central bankers back into tightening mode. The rate hike marks the central bank's first interest rate increase since July 2023.

Investors are also focused on the updated economic projections and the Fed's "dot plot" to gauge future rate moves, and the dot plot didn't rule out one more hike this year.

"In all, this left a clear sense of the Fed being at the likely start of a moderate tightening cycle rather than delivering a one-off hike," Goldman Sachs economist David Mericle said.

Surging US Treasury yields have started to spook stock investors, and by the time the 10-year hits 6%, markets could be in quite the tank.

Investor enthusiasm for stocks is retrenching as rising bond yields and US midterm election uncertainty cast a dark cloud over the markets, BofA's latest fund manager survey showed on Tuesday.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

The percentage of fund managers globally overweight stocks — in other words, bullish — has fallen to 49% from 56% last month. Conversely, fund manager cash levels rose to 3.9% from 3.5%, the biggest monthly increase since March of this year.

A "disorderly bond sell-off" is now the top market tail risk. Investors remain bullish, however, on corporate earnings, the AI investment cycle, and economic growth.

Brian Sozzi is Yahoo Finance's Executive Editor, host of the 'Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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