The 10-Year Treasury Yield May Continue To Climb as Fed Funds Moves Lower
The Fed may lower its Fed Funds rate another 25 BPS on Thursday, further stimulating already loose monetary policy (look at M2 over the past year).
The 10-Year Treasury yield may climb even as the Fed lowers Fed Funds. If so, how long before the Fed is back in the market exercising its latest round of QE in an effort to control the yield curve? That action will only make inflationary conditions worse.
The Fed is caught between a rock and a hard place entirely of its own doing given its actions since April 2020. The Fed seems willing to accept Core CPI above 3% in an effort to inflate the national debt away.
Meanwhile, the cost of debt is high with the 10-Year above 4%. It will be interesting to see how many companies choose to pay down debt at an accelerated rate rather than risk having to roll over balance sheet debt at a potentially higher rate 3, 6, 9 months from now should the 10-year yield move higher.