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Ten- and 30-year Treasury yields rose this week despite the Federal Reserve cutting its short-term interest rate.
The 10-year yield is little changed since early 2024, despite the Fed cutting rates multiple times since then.
Torsten Asmus | Istock | Getty Images
Longer-term Treasury yields jumped this week, flying in the face of the Federal Reserve’s interest rate cut, as bond investors didn’t get the assurances they sought.
The 10-year Treasury yield jumped as high as 4.145% after briefly falling below 4% this week. The 30-year Treasury yield — closely followed for its connection to home mortgages — traded around 4.76%, up from a low of 4.604% earlier in the week.
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10-year Treasury yield, 1 month
The Fed lowered its benchmark lending rate a quarter percentage point to 4.00%-4.25% at the end of its meeting on Wednesday, prompting investors to send stocks to record highs as they cheered the first rate cut of the year. But bond traders saw the move as an opportunity to “sell the news” after recent bond gains, according to Peter Boockvar, chief investment officer at One Point BFG Wealth Partners.
Traders of longer-dated bonds “don’t want the Fed to be cutting interest rates,” Boockvar said.
Their selling of long-term bonds drove down the price and drove up the yield. Prices and yields for bonds move in an inverse direction.
Easing monetary policy at a time when inflation is running above the Fed’s 2% target and the economy looks steady can indicate the central bank is “taking the eye off” inflation, Boockvar said, a key risk to longer duration securities. Updated economic projections from the Fed released Wednesday showed policymakers seeing slightly faster inflation next year.
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30-year Treasury yield, 1 month
Investors have been looking for the Fed to shift its emphasis from fighting inflation to boosting the labor market following weak employment data earlier this month. Fed Chair Jerome Powell called Wednesday’s rate cut a “risk management” move, pointing to the softening labor market.
“The bond market, if [longer yields] continue higher, would be sending a message that, ‘We don’t think you should be aggressively cutting interest rates with inflation stuck at 3%,'” Boockvar said.
Additionally, Boockvar said higher yields this week came after longer-dated bond prices had steadily risen in recent months, sending yields lower. It was a similar move as was seen following the Fed’s rate cut in September of last year, he noted.
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10-year Treasury yield, 6 months
But Boockvar said it’s noteworthy that the 10-year note yield is little changed compared with early 2024, despite the Fed cutting rates multiple times since then.
A rise in longer-term yields can have implications for mortgage loans on big-ticket purchases like homes and autos as well as credit card costs. Mortgage rates rose following the Fed rate cut this week after reaching a three-year low ahead of the central bank action.
Homebuilder Lennar on Thursday missed Wall Street’s revenue expectations for the third quarter and gave weak guidance for deliveries in the current quarter. Co-CEO Stuart Miller said in a statement that Miami-based Lennar faced “continued pressures” in today’s housing market and “elevated” interest rates for much of the third quarter.
Looking for ‘terrible news’
While the stock market can move significantly on one rate cut, bond investors are trying to make decisions based on what it sees as the bigger picture, according to Chris Rupkey, chief economist at FWDBONDS.
“It’s not the journey, it’s the destination,” he said. That can be determined in part by looking at the central bank’s projections for future rate cuts and the perceived neutral rate on the Fed funds rate.
“They’re trying to assess: What’s the end game in this?,” Rupkey said. “The bond market really will react once it is assured that the central bank is going to lower the rates dramatically.”
One Point’s Boockvar said longer-term U.S. yields can also be influenced by their international counterparts, which also tend to be moving higher, making it key to follow overseas economic developments and moves by foreign central banks.
Still, investors should be careful what they wish for when it comes to long-dated yields, Rupkey warned.
Yield declines often signal a recession on the horizon, the economist said. In fact, Rupkey attributed this week’s yield jumps in part to falling unemployment filings, which suggest less risk of an economic downturn anytime soon.
“Don’t rejoice so much about getting bond yields down, because it may mean that it’s impossible for you to find work,” Rupkey said.
“Unfortunately, the bond market only really embraces bad news,” he added. And unfortunately, “not just bad news … terrible news.”
— CNBC’s Fred Imbert and Diana Olick contributed to this report. More
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U.S. Treasury Secretary Scott Bessent speaks to the press, on the day of U.S.-China talks on trade, economic and national security issues, in Madrid, Spain, September 15, 2025.
Violeta Santos Moura | Reuters
White House confidante Steve Bannon has an unusual solution for who should take over as Federal Reserve Chair Jerome Powell next year.
In a podcast interview with Sean Spicer, who served as White House press secretary during President Donald Trump’s first term, Bannon recommended that Treasury Secretary Scott Bessent helm the central bank — while also keeping his current position.
“I am a big believer that on an interim basis, that Scott Bessent should be both the head of the Federal Reserve and the secretary of Treasury, and maybe get through the midterm elections, step down at Treasury and take over the Federal Reserve,” Bannon said for a show that will be aired at 6 p.m. Friday on YouTube, footage of which was obtained by CNBC’s Eamon Javers.
Bannon was chief White House strategist during Trump’s first term but lasted just seven months before the president fired him. However, he is still thought to be respected within the administration.
A White House response indicates there’s little if any interest in the proposal.
“Such an arrangement is not being and has never been considered by the White House,” a spokesman said.
Though there is no direct historical precedent, prior to the Banking Act of 1935 the Treasury chief served as an ex-officio Board of Governors member, before the position of Fed chair was created. Janet Yellen led the Fed then the Treasury, though those terms were several years apart.
Bessent has been leading the search for Powell’s successor when the chair’s term expires in May 2026. There reportedly are 11 candidates, of which Bessent was thought to be one until he publicly said he is content with his position at Treasury.
Trump has been persistently critical of the Fed for not lowering interest rates aggressively. More
