The 10-Year Treasury yield is up by 2.1 bps to 4.111% on Friday and is essentially unchanged when compared to its closing yield of 4.106% on September 17, the day the Fed cut rates by 25 bps. Since then, the yield has jumped to as high as 4.197%.
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Harbor Capital’s Jake Schurmeier believes that a potential rate cut at the October 28-29 Federal Open Market Committee (FOMC) meeting won’t lead to lower long-term yields. That’s because inflation remains well above the central bank’s target of 2%, while economic activity is expected to remain strong, potentially pushing prices higher.
Resilient Economy Keeps Yields Steady amid Fed Rate-Cut Bets
A strong economy raises the odds of rate hikes in the future, which is why the 10-year yield has remained steady since last month’s rate cut and in the face of additional reductions, said Schurmeier.
In the near term, it’s likely that the Fed will cut rates. CME’s FedWatch tool prices in 85.0% odds of two more rate cuts and 14.6% odds of one more rate cut by the end of the year.
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