1/
The Fed cut rates by 25 bps yesterday. But the bond market hit back. Instead of falling, yields spiked in a bear steepening move:
30Y 4.73% (+4.3 bps), 10Y 4.12% (+3.3 bps), 2Y 3.58% (+0.6 bps).
👉 The long end doesn’t buy it.
The Fed cut rates by 25 bps yesterday. But the bond market hit back. Instead of falling, yields spiked in a bear steepening move:
30Y 4.73% (+4.3 bps), 10Y 4.12% (+3.3 bps), 2Y 3.58% (+0.6 bps).
👉 The long end doesn’t buy it.
2/
Why?
– A cut with sticky inflation = risk of higher long-term inflation.
– Massive Treasury issuance = more supply, lower bond prices, higher yields.
– Investors demanding a bigger term premium for holding long debt.
Why?
– A cut with sticky inflation = risk of higher long-term inflation.
– Massive Treasury issuance = more supply, lower bond prices, higher yields.
– Investors demanding a bigger term premium for holding long debt.
3/
The key: long maturities jumped more than short. That’s the market’s way of saying:
“Fed, you’re easing too soon. We want more yield for lending over 10–30 years.”
The key: long maturities jumped more than short. That’s the market’s way of saying:
“Fed, you’re easing too soon. We want more yield for lending over 10–30 years.”
4/
Consequences:
– Mortgages & long-term corporate loans face pressure.
– Banks with HTM portfolios = more unrealized losses.
– U.S. budget: higher interest costs, deficits worse.
Consequences:
– Mortgages & long-term corporate loans face pressure.
– Banks with HTM portfolios = more unrealized losses.
– U.S. budget: higher interest costs, deficits worse.
5/
Market impact:
– Growth equities (sensitive to discount rates) = valuations at risk.
– Gold & silver: near-term FOMC shakeouts are typical, but loss of policy credibility = long-term tailwind.
Market impact:
– Growth equities (sensitive to discount rates) = valuations at risk.
– Gold & silver: near-term FOMC shakeouts are typical, but loss of policy credibility = long-term tailwind.
6/
What to watch:
– Treasury auctions (bid-to-cover).
– Breakevens & real yields.
– 2s10s spread: less inverted → cycle shift warning.
– Credit spreads (IG/HY).
– DXY vs. commodities.
What to watch:
– Treasury auctions (bid-to-cover).
– Breakevens & real yields.
– 2s10s spread: less inverted → cycle shift warning.
– Credit spreads (IG/HY).
– DXY vs. commodities.
7/
Bottom line:
The Fed wanted to ease, but the long end said NO. When policy rates drop but long yields rise, that’s not a pivot — it’s a loss of trust.
Bottom line:
The Fed wanted to ease, but the long end said NO. When policy rates drop but long yields rise, that’s not a pivot — it’s a loss of trust.
8/
I’m on team:
fewer narratives, more hard assets. Short-term swings are just noise — fundamentals speak loud and clear.
#bonds #USTreasuries #FOMC #macro #inflation #gold #silver #markets
I’m on team:
fewer narratives, more hard assets. Short-term swings are just noise — fundamentals speak loud and clear.
#bonds #USTreasuries #FOMC #macro #inflation #gold #silver #markets
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