Will the summer rally in bonds survive the autumn? Fresh doubts are bubbling as the market reconsiders a range of risk factors, including renewed skepticism about the Federal Reserve’s commitment to cutting interest rates.heads on Monday recommended “gradual” and “modest” rate cuts. Fed funds futures this morning align with their collective view: the market’s pricing in an 88%-implied probability for a ¼-point cut at the next FOMC meeting on Nov.
Note, however, that the 2-year yield has run higher in recent weeks. In late September, this maturity was approaching 3.5% and is now 50 points higher. There’s still a solid implied rate-cut forecast in the market, but the crowd is starting to dial down the degree of conviction. Treasury yields generally have rebounded, taking a toll on bond prices . Consider the iShares 7-10 Year Treasury Bond ETF . If correct, the case for arguing that the Fed rate-cutting policies are too dovish look set for an ongoing run of attitude adjustment.Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors.
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