Keep Your Eyes On The 10-Year Treasury While The Fed Continues Rate Cuts

Summary

• The Fed's recent rate cuts have not lowered 10-year and 2-year Treasury rates, which have recently crossed paths, indicating a potential "bear steepening" and possible recession.
• Rising US debt and economic headwinds suggest that further rate cuts may not effectively lower Treasury rates or other loan rates.
• The US debt-to-GDP ratio and weak economic growth forecast indicate a strained financial future, with potential credit rating downgrades.
• If the Fed fails to control the 10-year Treasury rate, rising rates on mortgages, auto loans, and business loans could follow, exacerbating economic instability.

hamzaturkkol/E+ via Getty Images

The Fed’s September 50 bps cut to the federal funds rate had the opposite effect on Treasuries than expected. The Fed lowered its rate another 25 bps on November 7. Since initiating rate cuts, both the 10-year and 2-year Treasuries have risen significantly. Ten-year

Analyst’s Disclosure: I/we have a beneficial long position in the shares of US3M either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The content of this article is intended for experienced investors capable of conducting their own market research and making well-informed investment decisions. This information should not be construed as advice or a recommendation for any particular security, transaction, or investment strategy. If you need investment advice, please contact a licensed financial advisor.