US real yields across the curve have risen sharply, according to John Velis of BNY Markets, with the increase attributed primarily to market expectations of further policy tightening by the Federal Reserve rather than inflation fears [1]. The market is currently anticipating up to an additional 75 basis points of policy tightening in this cycle, which has driven bond yields higher across the curve [1].
Velis notes that the rise in yields is due to perceptions of central bank credibility, as markets expect the Fed and other central banks to respond to inflation by raising rates. This has resulted in higher long-term yields, while breakevens and inflation swaps have remained within their recent ranges [1]. Specifically, all real yields have increased between 80 and 113 basis points, except for the real 2-year yield, which has surged by over 170 basis points [1].
Additional factors supporting higher real yields include robust economic growth and increased capital expenditures related to the AI and technology investment cycle, which are also reflected in the movement of real yields [1].
No specific market reactions or analyst forecasts beyond these observations are provided in the source.
CONCLUSION
US real yields have climbed significantly, driven by expectations of further Fed tightening and confidence in central bank responses to inflation. The move is further supported by strong economic growth and AI-related investments, signaling a high market impact as investors adjust to a potentially more hawkish policy environment.