Each year for the last few years we've been taking a hard look at the drivers behind interest rates and conveying our thoughts about where they might go in the future. Looking back to last year, we forecasted that without a substantial improvement in global economic growth expectations long-term interest rates wouldn't move significantly higher. Global economic growth expectations, and inflation expectations, have indeed increased since then and long-term rates followed the trend higher, though perhaps not as high as many had hoped and have fallen off slightly since March of 2021.

Why the pause in rising yields?  The pickup in COVID cases due to the Delta and now Omicron variants as well as the economic slowdown in China have been two of the leading drivers of the pause in the upward trajectory.  Higher inflation, partially due to supply shocks, should be goading long-term rates higher, while short-term rates are being held at bay by the Federal Reserve.