Putting Today’s Rising Rates in Context

Rising Treasury yields have pressured fixed income markets in 2026, reviving memories of 2022—one of the most difficult years on record for bond investors. But while rates are moving higher again, today’s starting point looks meaningfully different.¹

During the Federal Reserve’s aggressive 2022 tightening cycle, the federal funds target range rose from 0.25% in March 2022 to 5.25% by July 2023. Over those 18 months, the Bloomberg US Aggregate Bond Index declined 8.27% cumulatively and posted a record 13.01% decline in 2022. Entering that period, the index’s yield to worst was just 1.75%, leaving relatively little income to offset falling bond prices.²

Today, investors have considerably more yield to help absorb price pressure. One year ago, the Bloomberg US Aggregate Bond Index’s yield to worst stood at 4.37%, providing a higher level of starting income as rates have moved higher. Rates also have risen at a substantially slower pace than during the 2022 tightening cycle.²

Higher starting yields do not eliminate interest-rate risk, particularly for portfolios with duration. But the combination of a larger income cushion and a more gradual rise in rates has made the total-return environment meaningfully different from 2022.

With the future path of rates uncertain, we believe focusing on bottom-up security selection, downside protection and attractive risk-adjusted return opportunities remains a more durable approach than attempting to predict each move in interest rates.