Rates Rising and Reversal
March 23, 2026
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Last week concluded with a sharp rise in rates, with the 2-year Treasury yield surging by almost 20 basis points (bps) over the week and climbing 52 bps since the end of February.1 The possibility that central banks across the globe could raise interest rates has notably altered market sentiment. The 10-year Treasury yield neared 4.38%, while the 30-year closed at 4.94%, both marking their highest closing levels of the year.2 Since late February, the 10-year yield has risen 44 bps.3 These moves occurred alongside the outbreak of conflict in Iran, which has driven energy prices sharply higher, with West Texas Intermediate (WTI) crude oil up nearly 72% year-to-date.4
The Treasury curve bear-flattened as investors increasingly anticipated that the Federal Reserve may consider a rate hike this year. The Federal Open Market Committee (FOMC) left rates unchanged at last week’s meeting and leaned hawkish as it remains in a challenging position.5 The economy continues to experience above-target inflation and uncertainty in the labor market. The S&P 500 Index declined 1.87% for the week and is now down 4.7% year-to-date.6 The Russell 2000 Index has entered correction territory from the highs of 2026.7 However, investment-grade corporate credit outperformed during the week, with spreads tightening by five bps to 87 bps, led by long-duration corporates.8
The week started with a five-day extension of President Trump’s 48-hour deadline for Iran to open the Strait of Hormuz, which has pushed equity markets higher this morning.9 Aside from geopolitical headlines, investors will be watching energy prices and rates globally. The S&P Global U.S. Manufacturing Purchasing Managers’ Index (PMI) data on Tuesday will be an important gauge of economic health, followed by initial and continuing jobless claims on Thursday.10 Friday brings the University of Michigan’s inflation expectation reports.11 At the top of my watch list this week is policymakers—the old adage that “markets stop panicking when policymakers start to” still seems to resonate.
Sources:
1-4, 6-8, 10,11Bloomberg
5CNBC – Fed votes to hold rates steady, notes ‘uncertain’ impacts from Iran war; 3/18/26
9Bloomberg – Trump and Iran Hurl War Threats With Hormuz Crisis Building; 3/22/26
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