# Taper Tantrum

Source: https://www.yieldcurve.pro/learn/taper-tantrum

The **taper tantrum** refers to the sharp rise in Treasury yields during May-September 2013, triggered when Fed Chair Ben Bernanke testified that the Fed might begin reducing ("tapering") its monthly asset purchases under QE3.

The market impact was swift:

- **10-year Treasury yield** surged from 1.63% in early May to 2.98% by September — a move of **+135 bps** in roughly four months
- **Mortgage rates** jumped, threatening the housing recovery — the [mortgage-Treasury spread](https://www.yieldcurve.pro/mortgage/spread) widened sharply during this period
- **Emerging market bonds and currencies** sold off sharply as global capital flows reversed

The taper tantrum was significant because it revealed how dependent markets had become on QE:

- The mere *suggestion* of reducing purchases (not stopping, not selling) triggered a major selloff
- It demonstrated that QE operates partly through expectations — the market prices not just current purchases but the expected future stock of Fed holdings
- It forced the Fed to develop more careful communication strategies around balance sheet policy

The episode also illustrated a [term premium](https://www.yieldcurve.pro/learn/term-premium) repricing. The ACM model shows term premium spiking in mid-2013 as the market adjusted to the prospect of reduced central bank demand for duration.

The taper tantrum is referenced in several blog posts on this site, including the ChatYCP announcement and discussions of how policy communication drives curve movements.