The bond market appears primed to end the week on a sour
note, and the long end of the curve is leading the charge. The 30-year Treasury
yield popped to levels we haven’t seen since September, finishing around 4.86%.
That’s a big move considering the Fed just cut rates earlier this week.
Normally, a cut would pull yields lower, but Powell’s tone left traders
uneasy—hinting at more cuts down the road, which sparked fears that the Fed
might be too aggressive and risk reigniting inflation.
Add in sticky inflation expectations, strong economic data,
and a hefty 30-year auction that needed higher yields to clear, and you’ve got
a recipe for upward pressure on long bonds. The curve steepened as short rates
dipped on the Fed move, but the long end demanded a premium for all that
uncertainty—fiscal concerns, global central bank hawkishness, and the lingering
question of whether inflation really stays tame. Bottom line: the market’s not
buying the “easy money” story just yet.
Markets are mixed today: the S&P 500 is off about 53
points early, while the Dow is up nearly 90 bps. In bonds, short-term rates are
holding steady, but the long end is under pressure, with 30-year Treasuries
sharply higher. That selloff is steepening the curve and spilling into
mortgages—UMBS 30-years are down 2–5 ticks. It’s a good day to consider ARMs or
15-year quotes, which are less exposed to the long-end volatility.
