The year 2022 looks set to enter the history books alongside the 2008 global financial crisis and pandemic of 2020 as one of the wildest for financial markets in recent memory
It was the year that major central banks – caught unawares by the sharpest inflation surge in decades – responded with an aggressive run of interest rate increases.
The impact was palpable. The chart shows how the yield of the 10-year U.S. Treasury note, a global benchmark of investor sentiment and bank lending rates, reacted with some of the biggest moves in decades.
On March 2, the 10-year Treasury yield went up 15.4 basis points after U.S. Federal Reserve Chair Jerome Powell said he would back a 25 bps rate hike, while remaining flexible to respond to the effects on the economy from Russia’s war in Ukraine.
Yields again rose 13.4 basis points, two days before the Fed’s first rate hike in three years.
A New York Fed report showed consumers upped their one-year inflation expectations in February to the most on record.
Yields closed 15.3 basis points higher, a day after the Fed raised its benchmark rate by 50 bps, at the time the most in 22 years.
Investors began to question the central bank's ability to engineer a soft landing for the economy.
Yields surged a day before the Fed’s first 75 bps hike this year, the largest in over three years.
Just a week after, yields shed 14.9 basis points.
Powell said the Fed was not trying to engineer a recession, but was fully committed to bringing down inflation even if that risked an economic downturn.
A second hike of 75 basis points pushed yields up 19.6 basis points from the previous day.
Yields closed 32.2 basis points lower after October CPI inflation came in below forecasts. This was the biggest single-day drop in yields since March 18, 2009.
Rising yields in Treasuries mean investors lending to the U.S. government are demanding that it pays more in interest. These rates, in turn, act as benchmarks for lenders’ charges on almost all types of lending, including personal loans and mortgages.
As of Dec. 14, the yield on the 10-year Treasury note has spiked by 201 basis points in 2022 and is headed for its largest annual increase since 1994. It ended last year at 1.498% and, at 3.503%, has already more than doubled.
Annual change in basis points
Bar chart showing annual changes in yield of 10-year U.S. Treasury note.
And if the Fed’s aggressive rate hikes weren't enough to roil markets from the United States to Pakistan and China, investors also had to contend with Russia's invasion of Ukraine, the subsequent energy shock, turmoil in crypto currencies and political upheaval that sent British markets into a tailspin.
Daily change in yields of 10-year U.S. Treasury note during trading days of 2022.
Heat map of change in yields for 10-year U.S. Treasury notes during trading days of 2022.
Data is current as of Dec. 14, 2022.
Refinitiv Datastream
Eliza Martinuzzi, Vincent Flasseur and Julia Wolfe