The Treasury Tantrum of 2023

In the second half of last year, the 10-year Treasury yield skyrocketed from below 4 percent to above 5 percent, and then back down to 3.9 percent (Figure 1). On the way up, market commentary cited several key drivers for the rapid increase, including strong employment and inflation data, unexpectedly high Treasury issuance, and FOMC communications indicating that rates may need to be higher for longer.