The Fed slashed interest rates last week, but Treasury yields are rising. What’s going on?
With its larger-than-normal cut last week, the Federal Reserve sent a clear message that interest rates are heading considerably lower in the future.
With its larger-than-normal cut last week, the Federal Reserve sent a clear message that interest rates are heading considerably lower in the future.
The Treasury market, though, hasn’t been paying attention.
Despite the Fed approving a half percentage point reduction in its baseline short-term borrowing rate, Treasury yields instead have been moving higher, particularly at the long end of the curve.
The 10-year note yield, considered the benchmark for government bond yields, has leaped about 17 basis points since the Federal Open Market Committee meeting of Sept. 17-18 — reversing what had been a sharp decline throughout September. (One basis point equals 0.01%.)
For now, bond market professionals are writing off a good portion of the move as a simple makeup for markets pricing in too much easing before the Fed meeting. But the trend bears watching, as it could signal something more ominous ahead.
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