The FRED graph above shows the daily yield on 10-year U.S. Treasuries since the beginning of 2013. On May 22, 2013, Federal Reserve Chair Ben Bernanke announced that the Fed would start tapering asset purchases at some future date, which sent a negative shock to the market, causing bond investors to start selling their bonds. (See the dotted vertical line in the graph.) As a result, the yield on 10-year U.S. Treasuries rose from around 2% in May 2013 to around 3% in December. This sharp climb in yields is often referred to as the “taper tantrum.”
In late July 2021, Federal Reserve officials signaled that the Fed would start reducing the volume of its bond purchases later in the year. This signal made some investors worry about another taper tantrum; however, it might not be the case this time.
Despite these fears of history repeating, investors remained placid when the Fed hinted at tapering in July 2021. The Treasury yield remained around 1.3%, declining from its recent peak in early April. One explanation for this difference in market responses is that the announcement in 2021 was in line with market expectations and the announcement in 2013 came earlier than expected.
How this graph was created: Search for and select “10-Year Treasury Constant Maturity Rate.” To add the vertical line, refer to these instructions. The “Data start/end” of the vertical line is 2013-05-22.