the-market

The US Fed Versus the Bond Market

Donald ElefsonMarket AnalystJanuary 21, 2025

Due to better inflation and employment metrics, US Fed has been able to reduce their core interest rate in the last twelve months, which could be termed a success.

But the market, the entity that determines new issue bond prices and trading, doesn't seem to agree. In the last twelve months, the US Fed rate has gone down, but the US Ten-Year bond rate has gone up from 4.2% to 4.6%, and the 30 year mortgage rate is over 7%.

Why does the market disagree with the Fed? Is there something the market fears in the future that is taking precedence over the US Fed?

Perhaps. Some potential concerns are:

What will president Trump's policies really be?

What will president Trump's policies really be?

Is the US Fed next interest rate move up?

Is the US Fed next interest rate move up?

Will US government finances worsen and borrowing go up?

Will US government finances worsen and borrowing go up?

Of the three it seems borrowing going up is the biggest fear.

Regarding US borrowing, some very smart, savvy investors are starting to express concern about rising US borrowing and spending, the fiscal condition.

In a time when US government debt is high and looking to go higher, there is actually talk about raising or getting rid of the US debt ceiling.

Is the US headed towards a debt crisis? Too early to tell.

But, what we do know is that the market and US Fed disagree. Disagreement breeds uncertainty, and in times of uncertainty short-term bonds make sense.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

Donald Elefson

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Donald Elefson

Market Analyst

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