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Yields at Risk of Shooting Up as Fed Defers Bond-Buying Changes

  • A tweak would be harder in 2021 ‘practically and politically’
  • Treasury 10-year rate could rise to 1.3%-1.4%: Brown Advisory
fed building
Photographer: Andrew Harrer/Bloomberg

The Federal Reserve’s window to tinker with its bond-buying program may be narrowing, meaning there’s a risk that Treasury yields will climb faster than many predict.

At its final policy meeting of 2020, the U.S. central bank just decided not to tilt more purchases toward longer maturities -- something that could’ve kept a lid on longer-term interest rates. And while the Fed didn’t rule out eventually making such a change, a healthier U.S. economy -- possibly due to more fiscal stimulus if Democrats take control of the Senate after runoff elections on Jan. 5 -- could make it harder for the central bank to justify, according to some investors.