This Fed Rate-Cut Cycle Is Unusual
When the Fed lowers interest rates by a whole lot, usually it’s because the economy or the financial system — or both — are in trouble.
But the cuts haven’t been aimed at countering a recession, or some ruction in finance. It’s simply a reflection of normalizing policy after the most aggressive tightening cycle since the 1980s.
The bond market's reaction to the Federal Reserve's interest-rate cuts has been highly unusual, with Treasury yields climbing as the central bank lowers rates.
The divergence in the bond market indicates a matter of heated debate, with opinions ranging from a sign of confidence that recession will be averted to a signal that investors are losing confidence in the US's ability to rein in its national debt.
The Fed's lack of control over longer-term yields has drawn comparisons to the Greenspan conundrum, with some attributing the issue to a bond-supply glut caused by governments borrowing too much.
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