November 7, 2024
The political ads have stopped and the Federal Reserve cut the Fed Funds rate by 25 bps today. Its been a good couple of days! Unfortunately, the quarter percent rate reduction likely won’t affect longer term rates much. Since the September 18 50bp cut, shorter term rates have moved lower but the ten year note has gone HIGHER by almost 75 bps. Go figure. The market is apparently of the opinion that a more robust economy encouraged by the lower rates may lead to higher inflation. OR since the Fed can control the short term rates but the market controls the long term rates, the market may be finally getting nervous about the trillions in annual deficits and the tens of trillions in accumulated federal debt. The feds are regularly refinancing the maturing debt and the buyers of the debt want a higher return. Regardless, since inflation seems to be under control finally and the employment rate is steady to slightly increasing, most believe these rate reductions by the fed will continue for the next several months.
The short term bill market has gone down about 30 bps over the past thirty days to about 4.69% but the ten year is up about 30 bps to 4.31%.. The yield inversion (2 month-10 year) has dropped to only 32 bps.
The dollar has been moving higher over the past month against most major currencies.