Cleveland Fed’s Hammack on Rising Treasury Yields

Rising government bond yields illustrated by bond certificates and an upward chart for Treasury markets

Key Points

01Beth Hammack links higher long-term yields to stronger growth
02Concerns about U.S. government debt are contributing to yield moves
03Market expectations for further Fed rate hikes are influencing rates
04Hammack says real rates, not inflation fears, are driving the surge

Hammack explains drivers of higher Treasury yields

On Sept. 25, 2026, Federal Reserve Bank of Cleveland President Beth Hammack said long-term U.S. Treasury yields are being pushed higher by a combination of economic and policy factors. Speaking at a conference hosted by the Cleveland Fed, she pointed to a stronger growth outlook, rising concerns over U.S. government debt, and expectations for additional Federal Reserve interest rate increases as the main forces behind the recent move.

Hammack noted that recent economic growth figures have been solid and that investors appear to expect continued momentum. She said this stronger performance is one reason long-term borrowing costs have risen, as markets reprice the likely path of monetary policy and the broader economy.

Real rates, not inflation expectations, seen as key

Hammack emphasized that the recent surge in yields does not appear to be driven by a jump in inflation fears. She said it is real interest rates that have moved up more than inflation expectations, indicating that markets are reacting more to the outlook for growth and policy than to a change in views about future inflation.

She added that inflation expectations remain reasonably well anchored. This distinction between real rates and inflation expectations suggests that investors’ required compensation for lending in inflation-adjusted terms has increased, even though their long-run view of price stability has not shifted markedly.

Growth, debt, and policy path in focus for markets

By linking higher yields to growth, debt concerns, and the anticipated rate path, Hammack highlighted the multiple channels through which macroeconomic conditions are affecting the bond market. Stronger growth can push up real rates as demand for capital rises, while larger or more persistent fiscal deficits can raise questions about the supply of government debt.

At the same time, expectations for additional interest rate increases from the Federal Reserve can lift yields across the curve as markets build in a higher path for short-term policy rates. Hammack’s comments indicate that these factors, taken together, are playing a central role in the repricing of long-term U.S. government bonds.

Key Takeaways

01Recent increases in long-term Treasury yields are tied to growth, fiscal worries, and expectations for further Fed tightening rather than a jump in inflation fears.
02The primary shift has been in real interest rates, while inflation expectations remain described as reasonably well anchored.
03Market pricing of U.S. government bonds is being reshaped by views on the economy’s strength, debt dynamics, and the likely trajectory of monetary policy.

References