Recent Federal Reserve Decisions Have Weighed Heavily on Bond Markets

The Federal Reserve’s monetary policy decisions since mid-2024 have consistently moved rates higher and maintained a restrictive stance, contributing to a sustained sell-off in government bonds. Since the June 2024 meeting, the 10-year Treasury yield has climbed from 4.03% to a peak of 5.12% in November 2025, reflecting tight financial conditions and inflation persistence. The 30-year bond yield rose from 4.38% to 5.37% over the same period, signaling strong market expectations for prolonged rate levels. The cumulative effect of four rate hikes totaling 150 basis points between June and November 2024, followed by a pause and a single 25-basis-point increase in March 2025, has reshaped investor behavior. Bond investors have faced capital losses on long-duration securities, with the Bloomberg U.S. Aggregate Bond Index posting a negative return of 4.2% year-to-date as of December 10, 2025. This marks the first negative annual performance since 2022. The repricing of risk has also affected corporate debt, particularly high-yield and long-duration investment-grade bonds, where spreads over Treasuries have widened by an average of 85 basis points since mid-2024. Municipal bond markets have not been immune, with yields on 10-year general obligation bonds increasing by 0.92 percentage points since early 2024, reducing their attractiveness for income-focused investors. Market participants now closely watch the December 2025 Federal Open Market Committee meeting, with no rate changes expected but significant focus on forward guidance. A shift toward dovish signals could trigger a rebound in bond prices, though the current trajectory continues to favor Treasury and agency securities with shorter maturities.