How central bank policy drives yield movements

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Central bank actions are a major driver of bond yield movements.

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When markets expect interest rates to rise, bond yields typically increase in anticipation of tighter monetary policy. Conversely, expectations of rate cuts or accommodative policy tend to push yields lower. Even changes in central bank communication can influence yields by altering expectations.

 

Longer-term yields also reflect expectations about future policy paths, inflation and economic growth. As a result, bond yields often move ahead of actual central bank decisions, influencing markets before policy changes take effect.