Fed's cut and 10-year Treasury yield

Why is it rising?

The relationship between Federal Reserve (Fed) rate cuts and the 10-year Treasury yield has been counterintuitive in recent months:

Despite Fed rate cuts, 10-year Treasury yields have risen:

• The Fed has cut rates by 100 basis points since September 2024.

• However, the 10-year Treasury yield has increased by approximately 79-94 basis points in the same period.

• The 10-year Treasury yield has increased significantly this year:

  • From December 2023 to December 2024, the 10-year Treasury yield rose by approximately 57 basis points (0.57 percentage points).

  • As of December 20, 2024, the 10-year Treasury yield was at 4.552%.

  • At the start of December 2023, the yield was around 3.95%.

Factors contributing to rising yields:

• Potential concerns about inflation or increased government debt.

• Improved economic outlook and lower recession fears.

• Market expectations of fewer rate cuts than previously anticipated.

Impact on borrowing costs:

• Mortgage rates, which are often tied to the 10-year Treasury yield, may not dec…