Fed Cuts Rates, but Bond Market Pushes Back: Long-Term Yields Surge

The U.S. Federal Reserve delivered its first rate cut of the year this week, lowering its benchmark interest rate by 25 basis points to a range of 4.00–4.25%. While stocks rallied on the move, the bond market responded in the opposite way — long-term Treasury yields jumped instead of falling.

Bonds Sold Off, Mortgage Rates Rose Investors rushed to sell long-dated government bonds, sending their yields higher. The 10-year yield climbed to 4.145%, after briefly dropping below 4%. The key 30-year yield, which sets the tone for mortgage costs, rose to 4.76% after hitting a weekly low of 4.604%. This reversal quickly hit the housing market. Mortgage rates moved higher again, erasing gains from their three-year low earlier in the week. Homebuilder Lennar reported weaker third-quarter results and warned of softer deliveries ahead, blaming “continued pressures” and “elevated” interest rates.

Powell vs. Bond Traders Fed Chair Jerome Powell described the cut as a “risk management” move, pointing to a cooling labor market. But many traders saw it differently. Peter Boockvar, CIO of One Point BFG Wealth Partners, argued it sends the wrong message: “The Fed is easing policy while inflation is still above 3% and the economy remains strong. The market reads that as the Fed taking its eye off inflation.” Boockvar added that long-bond investors don’t want the Fed cutting rates. They used the move as a chance to sell — pushing bond prices down and yields higher.

Waiting for a Clear Signal According to Chris Rupkey, chief economist at FWDBONDS, one rate cut isn’t enough to convince markets. “It’s not the journey, it’s the destination. Traders are waiting to see how far the Fed will ultimately go,” he said. Only a clear sign of a larger and more sustained cutting cycle will sway investors. Global dynamics are also in play — international yields have been rising, and U.S. Treasuries are following. Rupkey cautioned, however, that falling yields often signal recession. “The bond market only really embraces bad news. Not just bad news… but terrible news,” he warned.

#Fed , #bondmarket , #FederalReserve , #Powell , #economy

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