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Markets are witnessing a 2013-like taper tantrum, with investors selling Treasury yields, causing a spike in bond yields on fears of an early unwinding of the stimulus by the Federal Reserve.  

“Back then, the Federal Reserve initially welcomed rising yields, saying they were due to better growth. But that only fanned the flames of the sell-off. It took a big dovish surprise – the “no taper” Sep. 2013 FOMC – to stabilize yields…,” Robin Brooks, Chief Economist at the Institute of International Finance (IIF), tweeted on Monday.  

The 10-year Treasury yield has jumped in recent weeks, with analysts interpreting it as a sign of investors pricing higher inflation and early Fed tightening. Meanwhile, the Fed officials have called it a signal of economic optimism, paving the way for more aggressive pricing of an early rate hike and a rally in yields.  

The central bank, however, may have to intervene if the rising yields end up destabilizing stock markets.