The Fed Rate Cut Drives Up Long-Term Yields

In September of 2024, the Federal Reserve cut interest rates by 50-points. Long-term yields went up.

The bond market reaction revealed something new to us.

Gone are the days (1999) when a Time headline proclaimed that Alan Greenspan, Robert Rubin and Lawrence Summers could save the markets as part of a Committee to Save the World.

The Fed can only lower the Federal Funds Rate — the rate that determines the annual interest rate on overnight deposits between banks and the central bank.

Unlike the dotcom boom and bust, the Fed and Treasury today have to deal with a higher debt-to-GDP ratio and (farther) out-of-control deficit spending.

Bond investors know the game.

So… it’s no surprise, really, that last year’s trend is on repeat, despite the much-bally-hooed rate cut last week:

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Following the Fed’s rate cut last week, bond traders pushed up yields on the 30-year
Treasury from 4.65% to 4.76%. (Source: CNBC)

For now, short-term investors — think money market and savings accounts — will see a drop in their yields.

But… despite Treasury Secretary Scott Bessent’s best efforts to finance the US government’s mounting pile of debt… longer-dated bonds are offering even higher yields.

For savers, there’s an option to grab those high yields while you can.

~ Addison

P.S.While the bond market is continuing to fight the Fed, defensive asset classes are taking off. Gold is well over $3,700 per ounce. Silver has topped $43 and may be on its way to retest its old highs at $48.

Plus, commodities such as uranium are breaking out after consolidating over the summer, and copper remains near highs. There’s still room for the commodity space to run.

This week on Grey Swan Live!, Portfolio Director Andrew Packer and contributor Shad Marquitz will review the latest developments in the commodity space and determine the best commodity plays through the end of 2025 and into 2026.

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If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

In September of 2024, the Federal Reserve cut interest rates by 50-points. Long-term yields went up.

The bond market reaction revealed something new to us.

Gone are the days (1999) when a Time headline proclaimed that Alan Greenspan, Robert Rubin and Lawrence Summers could save the markets as part of a Committee to Save the World.

The Fed can only lower the Federal Funds Rate — the rate that determines the annual interest rate on overnight deposits between banks and the central bank.

Unlike the dotcom boom and bust, the Fed and Treasury today have to deal with a higher debt-to-GDP ratio and (farther) out-of-control deficit spending.

Bond investors know the game.

So… it’s no surprise, really, that last year’s trend is on repeat, despite the much-bally-hooed rate cut last week:

Turn Your Images On

Following the Fed’s rate cut last week, bond traders pushed up yields on the 30-year
Treasury from 4.65% to 4.76%. (Source: CNBC)

For now, short-term investors — think money market and savings accounts — will see a drop in their yields.

But… despite Treasury Secretary Scott Bessent’s best efforts to finance the US government’s mounting pile of debt… longer-dated bonds are offering even higher yields.

For savers, there’s an option to grab those high yields while you can.

~ Addison

Plus, commodities such as uranium are breaking out after consolidating over the summer, and copper remains near highs. There’s still room for the commodity space to run.

Turn Your Images On

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

With the United States conducting what the Pentagon politely calls an “operation” against Iranian military infrastructure, markets have had every reason to be panicky. Instead, the past week delivered something subtler…

Gold has been consolidating after a powerful multiyear rally. Yet with America’s gold reserves equal to only about 3% of federal debt, the metal could still have significant upside ahead.

The Federal Reserve can print money, but it can’t print oil. As energy prices surge and supply disruptions loom, the central bank may find itself with limited tools to fight inflation driven by real-world shortages.

The plan to release 172 million barrels from the Strategic Petroleum Reserve would leave the U.S. with its smallest stockpile of emergency oil in more than four decades. And with tensions simmering globally, the shrinking reserve raises uncomfortable questions about how prepared the U.S. is for the next supply disruption…

Gold has been consolidating after a powerful multiyear rally. Yet with America’s gold reserves equal to only about 3% of federal debt, the metal could still have significant upside ahead.