Fed's Smaller Rate Cut May Trigger U.S. Treasury Sell-Off

Analysis

September 18, 2024 2:11 PM

In Brief:
Glen Capelo of Mischler Financial Group suggests a 25 basis point rate cut by the Federal Reserve could lead to a sell-off in U.S. Treasuries, influenced by Powell's press conference.
Michael Rosen of Angeles Investments believes the bond market is too aggressive in pricing rate cuts, predicting short-term yields will decline less than expected and long-term yields might rise.

Fed's Smaller Rate Cut May Trigger U.S. Treasury Sell-Off

As the Federal Reserve considers a 25 basis point rate cut, experts warn of potential sell-offs in U.S. Treasuries. Glen Capelo, managing director of fixed income at Mischler Financial Group, highlights the influence of Powell's press conference on market reactions.

Market Expectations and Bond Yield Predictions

Michael Rosen, executive partner and chief investment officer of Angeles Investments, argues that the bond market is pricing the Fed's rate cuts too aggressively. The market anticipates a 250 basis point cut next year, a scenario Rosen believes feasible only in the event of an economic recession. He predicts that short-term U.S. Treasury yields will decline less than market expectations, while long-term yields may rise.

The Federal Reserve's decision and subsequent market reactions remain critical as investors navigate the implications of potential rate adjustments and their impact on the bond market.

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