I can’t believe any president was dumb enough to fumble themself into a situation where the fed, previously set to lower rates, might actually need to raise rates now.
Republicans hate black Americans. They'll immiserate themselves if it means they can screw over black people. Just look at how fast and with such glee they've gone and wiped out black representation.
That's why they voted for Trump. Everything else is secondary.
Brainwashed by conservative media and podcasters. If I could time travel back to 2001, I would skip 9/11 and just go straight to sabotaging the tech around RSS feeds
Nostalgia. Americans remember look back at the 2016 - 2019 economy with rose tinted glasses. Many people believed he single handily reproduce the economy we once had. That and many didn’t ignored the fact that tariffs are inflationary.
Treasury yields ripping higher again, inflation running hotter than expected, and suddenly the market is rethinking the entire rate cuts in 2026 story. The 10-year yield climbed to around 4.5%—highest in nearly a year as traders priced in higher-for-longer rates.
What worries markets more right now sticky inflation, higher oil from the Iran war, rising deficits or the possibility the Fed may actually hike again instead of cut?
And bigger question are bonds finally becoming competition for stocks again?
Nominal yields can move because of growth, deficits, or risk premium not just inflation. Breakevens definitely give a cleaner read on what the market is actually pricing for inflation expectations.
Despite the numbers cuts will happen. That’s the whole reason for Warsh. And if Warsh isn’t enough they will force out Lisa Cook and Jerome Powell.
Trump has too much money riding across a spectrum of rate sensitive plays. Gives zero shits about the world seeing him use the Presidency to pump his bank roll.
The interesting question to me is what will the market do? You could cut rates and immediately face a bond revolt
Cutting rates in this environment will be disastrous and not in the long term. It will immediately shake the confidence in the US and lead to runaway inflation and yields.
This conveniently ignores both that the administration has been very clear that devaluation of the dollar is one of their main goals, and the fact that inflation inherently boosts stock prices and land values in aggregate, which they are also in favor of.
can you say more about this? seemingly if consumers are losing spending power to inflation, they are buying less goods and services, which would make stock prices go down. do you perhaps mean:
consumers aren't the ones doing spending (it's all b2b or a billionaire's-only market)
stock prices are disconnected from profit and loss
> stock is considered an asset, and to be attractive it must grow faster than inflation.
> That's the whole point of investment
the ideal case of investment is to increase your wealth in real terms, but the actual goal is to achieve the least-worst outcome for it. if you've got 10% inflation, bond rates at 5%, and 7% nominal return on stocks, seemingly you'd pick stocks, as you're losing the least wealth (as compared to holding cash or bonds).
Devaluation of dollar will not be big since most countries do not want to lose their export competitiveness.
Most likely they will switch from USD reserve to something else but would like to keep their currency from appreciating too much unless they have huge commodity exports.
They have no means to force anyone out. Any further attempts to do so in this market will undermine confidence further and the bond market will react. The US is not stronger than the bond market.
Also Walsh can say what he wants but he doesn’t have the votes. The Fed will outlast Trump. And again the Fee can’t push around the bond market.
Finally elections are coming. If Dems win the house Trump is a lame duck and the Fed will care less about his demands.
Nothing’s changed. We still have a petty administration that harasses people into quitting. I’m shocked you’ve somehow missed that after 1.5 years of living in it.
Did you miss that being immediately shot down in the courts? They've been on record multiple times siding against the admin on any occasion where they attempt to manipulate the Fed. At this point you guys are delving in to conspiracy.
Their attempts to legally remove Fed board members with bullshit charges have failed. The question then is whether Trump's administration would be willing to do anything illegal to successfully take over the Fed. Illegally taking over the fed could be a crossing the rubicon moment with no off ramp but it's something to watch out for if they feel cornered and desperate enough.
As we get closer to 2028 we will get a better idea if Trump, his cabinet, and members of his family can expect to leave office after a loss in 2028 and just go about their lives or if they should be concerned about a future attorney general that is much more interested in prosecuting political crimes than Merrick Garland was. If they fear they will be prosecuted for the crimes they have already committed then they might not be so concerned with committing more crimes to hold onto power.
Dude; “attempts to legally remove Fed board members with bullshit charges” is illegal, putting aside that believing they’ll just stop there and sit on their hands defies logic, I have no idea how you’re distinguishing that from “illegal” things in your head.
>Dude; “attempts to legally remove Fed board members with bullshit charges” is illegal,
Crossing the rubicon does not just mean illegal. It means a point of no return where they either win, die, or spend the rest of their lives in jail. A recent example of a crossing the Rubicon moment/decision was when Prigozhin and the Wagner Group rebelled, turned on the official army of Russia, and started to march on Moscow.
They've de-facto ruled several times, the final ruling isn't out but it won't be a surprise. This also was heavily telegraphed in opinions dating back over a year - where SCOTUS carved out specifically that the Fed board was off limits despite that case having nothing to do with the Fed. They're remarkably consistent here, IDK why so many pretend like this reality just doesn't exist.
Not that institutional money possesses clairvoyance, but it's amusing to me how often something highly confident gets upvoted to the moon on this sub and is 100% at odds with where institutional money has things priced. It'll never cease to amaze me how consistently popular sentiment here is completely opposed to where things sit with smart money.
Futures are pricing in rate hikes across the year, not cuts. Might be a good idea to consider asking why you're so sure we'll get cuts when everyone else is pretty certain we'll see hikes.
>Futures are pricing in rate hikes across the year, not cuts.
And you are basing your entire argument on what are essentially bets.
Just because the money is on blue gatorade for the superbowl, doesn't necessarily mean it's going to be blue gatorade... Especially when the bets are formed assuming a rational decision maker.
Oh that's not bets. That's institutional futures pricing. This isn't really the same thing as like betting markets or whatever you may be thinking of.
Fed funds futures are actual financial instruments that are generally purchased by banks, insurers, and various other financial institutions as a form of insurance to hedge against shifting carry costs.
Also, it's worth noting that the Federal Reserve monitors FFR futures and uses them as a benchmark to determine how accurate the Fed's communication policy is. Which is to say, the Fed would say their communication is ineffective if futures are materially out of line with their intent.
It would be appropriate to say that at any given point the futures market is the best financial approximation of the summation of current information and Fed communication.
Some interesting pieces if you'd like to go further down that rabbit hole:
I will respond to this later I want to read your sources. I understand their use and I am not claiming they operate under the same dynamics of betting markets, but rather they are still based on expectations and perception that mostly assume a rational actor.
I am not a conspiracist, and I am not claiming Trump will enact some secret Hydra plan and start nationalizing private institutions. Although I can already see him(and others, not solely him) doing so in other dark, quasi-legal and insidious ways. My focus is public admin. But every market is based on some form of perception/expectation, and even those benchmarks to some degree are also based on human/institutional perception. Again I will read through your sources later I want to do more than a quick AI-skim of them.
That’s the real risk cutting rates is one thing, but if bond markets see it as politically driven instead of data-driven, yields could actually move higher, not lower. Then the Fed solves one problem and creates another.
I wonder if this had an effect on Miran leaving. Cutting rates was his estasblished MO.
I think people are reading too much into Warsh, and Trump for that matter having a mission to cut rates. Equities can be detached from reality, but bonds have a direct relationship with debt and the sustainability of every government and business in the world.
That said, they've been more willing than past administrations to take risks - record tariffs and diplomatic and policy aggression, etc. Maybe a crisis of confidence or alternate future is also something they (and perhaps other benefactors) actually want? Volatility is obviously being encouraged. We just don't know the intended degree and every path it will lead to yet.
the only problem is the fed has limited control over the 10 and 30 year rates. if people start seeing US debt as a bad long-term investment, it could get ugly fast.
>And if Warsh isn’t enough they will force out Lisa Cook and Jerome Powell.
The baseless legal charges have failed to do that.
If the White House wants to succeed in forcing out Fed board members it would have to get more aggressive and do something closer to kidnapping or direct violence. Or it would have to declare the entire Fed to be under it's control and send agents to take control of the Federal Reserve's buildings while ignoring the inevitable court decisions telling it to stop.
This is an administration that has had masked government agents gun people down in the streets so anything can happen, but I would expect there to be a much stronger reaction to using that kind of force or implied force against what is considered "important people" instead of protesters. It would be a crossing the Rubicon moment.
If the FED cuts interest rates now, one thing is for sure and that is the market no longer trust the FED is in control of anything and long term bonds will go nuts.
Powell isn't going anywhere. He knows that Trump is a petty man and Powell is much better able to defend himself as a Fed Governor than he would as a private citizen.
Plus Powell comes from Republican money circles, who in that world is going to hire him when Trump is going after him and would use the office of the President to punish prospective employers.
Powell isn't going anywhere and the DOJ essentially admitted they know of no crime he's committed.
It's not a foregone conclusion. A large majority of Fed governors agree with Powell, and two of the three who didn't actually were more conservative, not less. Warsh would have to be very convincing to swing a lot of votes to the rate cut side, particularly with the PPI up and Iran unsettled.
>What worries markets more right now ... possibility the Fed may actually hike again instead of cut
Yields aren't really a reflection of what people expect The Fed will do. They are a reflection of expected inflation, which is also what necessitates rate increases. If The Fed ignores persistent inflation and leaves rates unchanged or lowers rates, it just makes the expectations of higher and longer inflation rise, which increases yields.
> Yields aren't really a reflection of what people expect The Fed will do.
They absolutely are. You can sit down at a terminal and plug in FWCM <GO> or FWCV <GO> and it'll literally vomit out real time short rate path expectations based on the current forward yield curve. The fed funds futures market will generally line up with this one for one.
The idea that the yield curve is somehow not constructed based on the expected FFR path is just nonsensical to the core, IDK where people get these ideas but it's certainly not any sort of formal education around yields construction.
E: OP's not interested in learning, but for those who are reading and would like to better understand I'll link some authorities and explanations here, but also see the links in my follow up comment below!
>What determines the slope of the yield curve? One explanation—the expectations theory—holds that expectations about future interest rates account for the relationship between yields and maturity, and, thus, the slope of the curve. This theory assumes that instruments of different maturities are equally attractive to investors, who care only about returns. Therefore, investors will buy and sell instruments of different maturities until long-term rates reflect an average of the short-term rates that are expected to prevail in the future.
>The forward rate at a given maturity can be thought of as a gauge of the market's expected short rate at that horizon, plus a term premium. On the other hand, because a bond's yield is an average of the forward rates over the term of a bond, yields tend to dull the signal embedded in forward rates.
>The Federal Reserve influences short-term interest rates across the economy by targeting the federal funds rate, the interest rate at which banks lend to each other overnight and a benchmark for other interest rates in the economy. The yield curve reflects market expectations about future Fed interest-rate moves. Increases in the Fed’s target for short-term rates usually – but not always – lead to an increase in longer-term rates. The average response to a December 2017 survey of 23 broker-dealers estimated that Fed rate increases explain about two-thirds of the decline in the yield curve’s slope between December 2015 and December 2017.
You can further see from my below links that this is deeply rooted in the core aspects of interest rate math and structure. Generally these concepts are worked through in your second year finance courses, maybe first year depending on the school. Not everyone does that obviously, but as Reddit does - it's all too common to see hyper confident people on this subreddit expressing ideas that are just completely at odds with the most basic aspects of finance/econ.
I'm not sure how you read anything above and came to that conclusion but no that wouldn't be accurate nor implied anywhere. I'll start from the beginning, presuming you've not taken any intro coursework regarding yields.
Perhaps exploring these concepts would be helpful:
Hope that helps, but to summarize yes forwards rates and the entire curve are generally 100% a product of expectations around short rate movements, and no that's not at odds at all with the idea of a market driven yield.
Yields are 100% determined by the free market. Expectations about rates are in line with expectations about inflation, because the market expects The Fed to act rationally and in line with inflation expectations.
Ask yourself what would happen if rates were at 7% for a year or two and the Fed announced that they were likely to cut rates from 7% to 0% at the next meeting.
I'll never understand why so many people do this here. It's not that serious of a mistake, I posted a bunch of sources for you to learn from, many of which are covered in intro econ (yield construction is more of an intro finance thing, but w/e, you'd only know that if you took those courses I suppose...). And like a lot of laymen, rather than being interested in expanding your understanding of a given topic - it's this lol.
Read your last 3 comments prior to mine and let me know how your condescension is OK, but mine isn't. Also, I'm not a layman. The problem is you think YOU are the expert and everyone that disagrees with you is a "layman". In other words, maybe nobody likes you because of your superiority complex.
It's gonna be real interesting to see what that new fed chair does. He seems to be 100% in the administration's pocket and the administration has been crying about how we need to cut interest rates since day one. I feel like a big rate cut would be a massive self own by the US.
FWIW, the futures market is pricing in rate hikes at the moment. New information over time will certainly change things, but institutional money is betting in the opposite direction in a fairly large way.
Trump's policies, plus unnecessarily picking seriius fights with almost every legitimate ally overseas, will cause our future government budgets to swell. He is taking on massive debt with nothing in exchange. An example: More than $2 trillion in deficit spending this year to grow our economy at 2%, right? How much is 2% about $650 billion. His reckless spending and endless tax cuts for the rich are harming us. Now the increased interest rates will add to the interest payments on our enormous debt, which is already about $39 trillion and will eclipse $40 trillion this year. Remember Trump also wants to add more than $500 billion (half of $1 trillion) to our annual budget for defense.
Yup, this also causes harm to allies. They too have to take measures to boost their economies and in turn screw their balance sheets. They will think twice before increasing alliance again.
they've lost control of the long end of the curve. look at what's happening in the UK, 30-year GILT is pushing up past 6%. this is not good. most likely a full financial reset / repricing coming in the next 5 years (we're already seeing the beginnings with this massive equities appreciation).
Doomsday scenario for what? It's not good for our national debt as it costs a lot to service it. It's also not good for anyone getting a house or car loan any time soon.
The fed only controls the overnight (short term) rates. This has an effect on the 10-year, but it's not the only thing that moves this needle. Right now the fed has held steady on short term rates but the market is pricing higher bond yields because they think rates will rise in the future, they require more more premium for the amount of risk, or a combination of the two.
True, but this doesn't necessarily lower rates. This signals to investors that there's not enough demand at these prices so the fed has to step in and buy at what the treasury is selling at.
Correct. So it depends on how the fed handles things if/when they step in. If they say something like "we are going to be buying longer term bonds but only temporarily until the congress and the executive cut spending/raise taxes or change other policies" then I think the market would see that as welcome news
It hit 4.5% at its peak during that whole event around the tariffs. That was what made him back off. From my understanding, there was so much deleveraging over the rapidly crashing stock market that many funds needed to dump treasuries all at once to raise cash, which made rates jump like 30-40 bps in like 2 days.
The last time it hit 5% was very briefly in October 2023, but it did cool back to the low 4%s by mid-winter.
And a week from now it will be below 5% again. Doomer-click-bait as always. Everyone wants Trump, understandably, to fail, so every little thing will be blown up 10x for the clicks.
Everyone salivating for that financial collapse that will be Trump and MAGAs undoing.
> veryone wants Trump, understandably, to fail, so every little thing will be blown up 10x for the clicks.
I don't understand the point you're making, you think if this didn't happen under trump, people wouldn't report on it? Before 2025 the last time it hit above 5% was 2007. With that in mind, do you think that's not significant to report on, even if it is the 3rd/4th time since 2025 it has happened?
flyingasian2 | 13 hours ago
I can’t believe any president was dumb enough to fumble themself into a situation where the fed, previously set to lower rates, might actually need to raise rates now.
lobonmc | 11 hours ago
Why did americans believe trump was better for the economy? Seriously how?
TenderfootGungi | 6 hours ago
Half of America is completely brainwashed. It is shocking talking to some of my family.
Upbeat-Stage2107 | 8 hours ago
Republicans love Fox News
narkybark | 7 hours ago
Avian flu caused egg prices to go up. That's about it.
guachi01 | 4 hours ago
Republicans hate black Americans. They'll immiserate themselves if it means they can screw over black people. Just look at how fast and with such glee they've gone and wiped out black representation.
That's why they voted for Trump. Everything else is secondary.
ETsUncle | 10 hours ago
Brainwashed by conservative media and podcasters. If I could time travel back to 2001, I would skip 9/11 and just go straight to sabotaging the tech around RSS feeds
sofoxsea | 5 hours ago
Nostalgia. Americans remember look back at the 2016 - 2019 economy with rose tinted glasses. Many people believed he single handily reproduce the economy we once had. That and many didn’t ignored the fact that tariffs are inflationary.
[OP] Illustrious_Lie_954 | 15 hours ago
Treasury yields ripping higher again, inflation running hotter than expected, and suddenly the market is rethinking the entire rate cuts in 2026 story. The 10-year yield climbed to around 4.5%—highest in nearly a year as traders priced in higher-for-longer rates. What worries markets more right now sticky inflation, higher oil from the Iran war, rising deficits or the possibility the Fed may actually hike again instead of cut? And bigger question are bonds finally becoming competition for stocks again?
RIP_Soulja_Slim | 15 hours ago
Rather than nominal yields, tips breakevens are a better way to look at the market implied pricing on inflation expectations.
https://fred.stlouisfed.org/series/T10YIE
https://fred.stlouisfed.org/series/T5YIE
[OP] Illustrious_Lie_954 | 14 hours ago
Nominal yields can move because of growth, deficits, or risk premium not just inflation. Breakevens definitely give a cleaner read on what the market is actually pricing for inflation expectations.
AMCorBUST2021 | 14 hours ago
Despite the numbers cuts will happen. That’s the whole reason for Warsh. And if Warsh isn’t enough they will force out Lisa Cook and Jerome Powell.
Trump has too much money riding across a spectrum of rate sensitive plays. Gives zero shits about the world seeing him use the Presidency to pump his bank roll.
The interesting question to me is what will the market do? You could cut rates and immediately face a bond revolt
1098duc_w_the_termi | 14 hours ago
Cutting rates in this environment will be disastrous and not in the long term. It will immediately shake the confidence in the US and lead to runaway inflation and yields.
Barnyard_Rich | 13 hours ago
This conveniently ignores both that the administration has been very clear that devaluation of the dollar is one of their main goals, and the fact that inflation inherently boosts stock prices and land values in aggregate, which they are also in favor of.
Microplasticsharts | 12 hours ago
They know 95% of Trump voters don’t understand devaluation and will be fooled for awhile by rising stock and real estate prices.
acemedic | 12 hours ago
And acquiesce to higher prices at the pump and grocery store.
At least no gay frogs got free trans surgery!
dust4ngel | 7 hours ago
> inflation inherently boosts stock prices
can you say more about this? seemingly if consumers are losing spending power to inflation, they are buying less goods and services, which would make stock prices go down. do you perhaps mean:
Barnyard_Rich | 6 hours ago
Both alternative explanations are also true, but stock is considered an asset, and to be attractive it must grow faster than inflation.
That's the whole point of investment.
dust4ngel | 5 hours ago
> stock is considered an asset, and to be attractive it must grow faster than inflation. > That's the whole point of investment
the ideal case of investment is to increase your wealth in real terms, but the actual goal is to achieve the least-worst outcome for it. if you've got 10% inflation, bond rates at 5%, and 7% nominal return on stocks, seemingly you'd pick stocks, as you're losing the least wealth (as compared to holding cash or bonds).
Anymous2314 | 11 hours ago
Devaluation of dollar will not be big since most countries do not want to lose their export competitiveness.
Most likely they will switch from USD reserve to something else but would like to keep their currency from appreciating too much unless they have huge commodity exports.
GoldponyGT | 14 hours ago
That would matter to an administration unwilling to do disastrous things.
Phoenix_Lazarus | 13 hours ago
Looking at BOJ rates, would this trigger a carry trade undwind?
joepez | 14 hours ago
They have no means to force anyone out. Any further attempts to do so in this market will undermine confidence further and the bond market will react. The US is not stronger than the bond market.
Also Walsh can say what he wants but he doesn’t have the votes. The Fed will outlast Trump. And again the Fee can’t push around the bond market.
Finally elections are coming. If Dems win the house Trump is a lame duck and the Fed will care less about his demands.
dust4ngel | 6 hours ago
> They have no means to force anyone out.
nothing legal. but seemingly we are past that particular constraint.
> Any further attempts to do so in this market will undermine confidence further and the bond market will react.
it's not clear that this would dissuade anyone whose goal is to undermine confidence further.
EconomistWithaD | 14 hours ago
Cuts will happen? I would reread the minutes from the last Fed meeting.
How will they “force out” Cook and Powell.
Less conspiracy, more positive economics.
GoldponyGT | 14 hours ago
Did you miss them trying to force Cook out already? You think that’s going to stop?
EconomistWithaD | 14 hours ago
And yet she’s still there, and still voting.
So, again, please let me know how they will suddenly manage to do it, when they haven’t been successful?
What’s changed since the SCOTUS ruling in January?
GoldponyGT | 12 hours ago
Nothing’s changed. We still have a petty administration that harasses people into quitting. I’m shocked you’ve somehow missed that after 1.5 years of living in it.
EconomistWithaD | 12 hours ago
Oh, so just making up hypotheticals, while the rest of us see that Cook is still involved in decision making.
Got it.
I wish I too could live in fantasy land.
GoldponyGT | 12 hours ago
It’s only “hypothetical” if you ignore the last 1.5 years, but ok
RIP_Soulja_Slim | 14 hours ago
Did you miss that being immediately shot down in the courts? They've been on record multiple times siding against the admin on any occasion where they attempt to manipulate the Fed. At this point you guys are delving in to conspiracy.
Alt4816 | 13 hours ago
Their attempts to legally remove Fed board members with bullshit charges have failed. The question then is whether Trump's administration would be willing to do anything illegal to successfully take over the Fed. Illegally taking over the fed could be a crossing the rubicon moment with no off ramp but it's something to watch out for if they feel cornered and desperate enough.
As we get closer to 2028 we will get a better idea if Trump, his cabinet, and members of his family can expect to leave office after a loss in 2028 and just go about their lives or if they should be concerned about a future attorney general that is much more interested in prosecuting political crimes than Merrick Garland was. If they fear they will be prosecuted for the crimes they have already committed then they might not be so concerned with committing more crimes to hold onto power.
GoldponyGT | 12 hours ago
“crossing the rubicon” lol
Dude; “attempts to legally remove Fed board members with bullshit charges” is illegal, putting aside that believing they’ll just stop there and sit on their hands defies logic, I have no idea how you’re distinguishing that from “illegal” things in your head.
Alt4816 | 12 hours ago
>“crossing the rubicon” lol
>Dude; “attempts to legally remove Fed board members with bullshit charges” is illegal,
Crossing the rubicon does not just mean illegal. It means a point of no return where they either win, die, or spend the rest of their lives in jail. A recent example of a crossing the Rubicon moment/decision was when Prigozhin and the Wagner Group rebelled, turned on the official army of Russia, and started to march on Moscow.
GoldponyGT | 12 hours ago
It’s not much of a conspiracy when the President admits he’s doing it.
SCOTUS hasn’t even ruled on Trump v. Cook yet, if they rule in his favor, she’s removed.
If they don’t rule in his favor, thinking he’ll give up and not try something else is idiotic.
RIP_Soulja_Slim | 11 hours ago
They've de-facto ruled several times, the final ruling isn't out but it won't be a surprise. This also was heavily telegraphed in opinions dating back over a year - where SCOTUS carved out specifically that the Fed board was off limits despite that case having nothing to do with the Fed. They're remarkably consistent here, IDK why so many pretend like this reality just doesn't exist.
EconomistWithaD | 14 hours ago
When you have to cosplay at being smart, you have to double down on previously shitty calls.
They’ll probably still be warning about Cook’s firing in 2035.
RIP_Soulja_Slim | 13 hours ago
Always fascinating when people choose doubling down for a dozen comments over "oh yeah, I missed that, thanks!"
EconomistWithaD | 13 hours ago
You would think on an ECON sub they would remember their Keynes.
“When the facts change, I change my mind.”
AMCorBUST2021 | 13 hours ago
Are you and I watching the same administration?
Respect for law and convention and institutions and tradition do not exist with these guys.
EconomistWithaD | 13 hours ago
Can you not answer the question?
You are declarative about it, and yet you can’t say how? What’s changed since SCOTUS?
RIP_Soulja_Slim | 12 hours ago
This sort of reply is so common on this sub, but to me just screams "I want to disagree but can't do so based on actual information"
yeoldenhunter | 11 hours ago
Also fails to account for the fact that they haven't done it already. If the law is no limitation, what is stopping them?
EconomistWithaD | 6 hours ago
So, you can’t answer “how”, which means you don’t know. 👍🏻
RIP_Soulja_Slim | 13 hours ago
> Despite the numbers cuts will happen.
Not that institutional money possesses clairvoyance, but it's amusing to me how often something highly confident gets upvoted to the moon on this sub and is 100% at odds with where institutional money has things priced. It'll never cease to amaze me how consistently popular sentiment here is completely opposed to where things sit with smart money.
Futures are pricing in rate hikes across the year, not cuts. Might be a good idea to consider asking why you're so sure we'll get cuts when everyone else is pretty certain we'll see hikes.
GhostofBeowulf | 10 hours ago
>Futures are pricing in rate hikes across the year, not cuts.
And you are basing your entire argument on what are essentially bets.
Just because the money is on blue gatorade for the superbowl, doesn't necessarily mean it's going to be blue gatorade... Especially when the bets are formed assuming a rational decision maker.
RIP_Soulja_Slim | 10 hours ago
Oh that's not bets. That's institutional futures pricing. This isn't really the same thing as like betting markets or whatever you may be thinking of.
Fed funds futures are actual financial instruments that are generally purchased by banks, insurers, and various other financial institutions as a form of insurance to hedge against shifting carry costs.
Also, it's worth noting that the Federal Reserve monitors FFR futures and uses them as a benchmark to determine how accurate the Fed's communication policy is. Which is to say, the Fed would say their communication is ineffective if futures are materially out of line with their intent.
It would be appropriate to say that at any given point the futures market is the best financial approximation of the summation of current information and Fed communication.
Some interesting pieces if you'd like to go further down that rabbit hole:
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr491.pdf
https://www.proquest.com/openview/7e077141b92c75d38151a6af99986108/1?cbl=3598&pq-origsite=gscholar
https://www.clevelandfed.org/-/media/project/clevelandfedtenant/clevelandfedsite/publications/economic-commentary/2001/ec-20011001-how-well-does-the-federal-funds-futures-rate-predict-the-future-federal-funds-rate-pdf.pdf
https://www.nber.org/system/files/working_papers/w10547/w10547.pdf
GhostofBeowulf | 7 hours ago
I will respond to this later I want to read your sources. I understand their use and I am not claiming they operate under the same dynamics of betting markets, but rather they are still based on expectations and perception that mostly assume a rational actor.
I am not a conspiracist, and I am not claiming Trump will enact some secret Hydra plan and start nationalizing private institutions. Although I can already see him(and others, not solely him) doing so in other dark, quasi-legal and insidious ways. My focus is public admin. But every market is based on some form of perception/expectation, and even those benchmarks to some degree are also based on human/institutional perception. Again I will read through your sources later I want to do more than a quick AI-skim of them.
[OP] Illustrious_Lie_954 | 14 hours ago
That’s the real risk cutting rates is one thing, but if bond markets see it as politically driven instead of data-driven, yields could actually move higher, not lower. Then the Fed solves one problem and creates another.
h4ms4ndwich11 | 13 hours ago
I wonder if this had an effect on Miran leaving. Cutting rates was his estasblished MO.
I think people are reading too much into Warsh, and Trump for that matter having a mission to cut rates. Equities can be detached from reality, but bonds have a direct relationship with debt and the sustainability of every government and business in the world.
That said, they've been more willing than past administrations to take risks - record tariffs and diplomatic and policy aggression, etc. Maybe a crisis of confidence or alternate future is also something they (and perhaps other benefactors) actually want? Volatility is obviously being encouraged. We just don't know the intended degree and every path it will lead to yet.
EconomistWithaD | 13 hours ago
Miran had to leave because Powell invoked his rights to return back to the board.
Explains his decision making, since Miran is an ill intentioned thug.
Zealousideal-Bus4712 | 12 hours ago
the only problem is the fed has limited control over the 10 and 30 year rates. if people start seeing US debt as a bad long-term investment, it could get ugly fast.
Only-Worldliness2006 | 5 hours ago
That's currently what is happening. That's why the yield spiked the way it did. Private investors are losing trust in the US federal government.
Alt4816 | 13 hours ago
>And if Warsh isn’t enough they will force out Lisa Cook and Jerome Powell.
The baseless legal charges have failed to do that.
If the White House wants to succeed in forcing out Fed board members it would have to get more aggressive and do something closer to kidnapping or direct violence. Or it would have to declare the entire Fed to be under it's control and send agents to take control of the Federal Reserve's buildings while ignoring the inevitable court decisions telling it to stop.
This is an administration that has had masked government agents gun people down in the streets so anything can happen, but I would expect there to be a much stronger reaction to using that kind of force or implied force against what is considered "important people" instead of protesters. It would be a crossing the Rubicon moment.
L4gsp1k3 | 13 hours ago
If the FED cuts interest rates now, one thing is for sure and that is the market no longer trust the FED is in control of anything and long term bonds will go nuts.
MrFrode | 12 hours ago
> Jerome Powell
Powell isn't going anywhere. He knows that Trump is a petty man and Powell is much better able to defend himself as a Fed Governor than he would as a private citizen.
Plus Powell comes from Republican money circles, who in that world is going to hire him when Trump is going after him and would use the office of the President to punish prospective employers.
Powell isn't going anywhere and the DOJ essentially admitted they know of no crime he's committed.
Icedidit | 11 hours ago
Trump did over 6k trades in Q1 this year. He’s got a lot invested into this market
DFWPunk | 9 hours ago
It's not a foregone conclusion. A large majority of Fed governors agree with Powell, and two of the three who didn't actually were more conservative, not less. Warsh would have to be very convincing to swing a lot of votes to the rate cut side, particularly with the PPI up and Iran unsettled.
morbie5 | 12 hours ago
> they will force out Lisa Cook and Jerome Powell
They tried and they failed with respect to Powell and I think they'll fail with Cook too
FredFuzzypants | 10 hours ago
Warsh is only one vote out of 12. Do you really think there are six other members who would vote to lower rates in this environment?
Competitive_Lack1536 | 9 hours ago
News out they planning rate hike
Icedidit | 11 hours ago
How many cuts did they expect this year
Adventurous-Guava374 | 10 hours ago
They are
OddlyFactual1512 | 13 hours ago
>What worries markets more right now ... possibility the Fed may actually hike again instead of cut
Yields aren't really a reflection of what people expect The Fed will do. They are a reflection of expected inflation, which is also what necessitates rate increases. If The Fed ignores persistent inflation and leaves rates unchanged or lowers rates, it just makes the expectations of higher and longer inflation rise, which increases yields.
RIP_Soulja_Slim | 13 hours ago
> Yields aren't really a reflection of what people expect The Fed will do.
They absolutely are. You can sit down at a terminal and plug in FWCM <GO> or FWCV <GO> and it'll literally vomit out real time short rate path expectations based on the current forward yield curve. The fed funds futures market will generally line up with this one for one.
The idea that the yield curve is somehow not constructed based on the expected FFR path is just nonsensical to the core, IDK where people get these ideas but it's certainly not any sort of formal education around yields construction.
E: OP's not interested in learning, but for those who are reading and would like to better understand I'll link some authorities and explanations here, but also see the links in my follow up comment below!
https://www.stlouisfed.org/publications/regional-economist/october-1997/yielding-clues-about-recessions-the-yield-curve-as-a-forecasting-tool
>What determines the slope of the yield curve? One explanation—the expectations theory—holds that expectations about future interest rates account for the relationship between yields and maturity, and, thus, the slope of the curve. This theory assumes that instruments of different maturities are equally attractive to investors, who care only about returns. Therefore, investors will buy and sell instruments of different maturities until long-term rates reflect an average of the short-term rates that are expected to prevail in the future.
https://www.federalreserve.gov/econres/notes/feds-notes/dont-fear-the-yield-curve-20180628.html
>The forward rate at a given maturity can be thought of as a gauge of the market's expected short rate at that horizon, plus a term premium. On the other hand, because a bond's yield is an average of the forward rates over the term of a bond, yields tend to dull the signal embedded in forward rates.
/
https://www.brookings.edu/articles/the-hutchins-center-explains-the-yield-curve-what-it-is-and-why-it-matters/
>The Federal Reserve influences short-term interest rates across the economy by targeting the federal funds rate, the interest rate at which banks lend to each other overnight and a benchmark for other interest rates in the economy. The yield curve reflects market expectations about future Fed interest-rate moves. Increases in the Fed’s target for short-term rates usually – but not always – lead to an increase in longer-term rates. The average response to a December 2017 survey of 23 broker-dealers estimated that Fed rate increases explain about two-thirds of the decline in the yield curve’s slope between December 2015 and December 2017.
You can further see from my below links that this is deeply rooted in the core aspects of interest rate math and structure. Generally these concepts are worked through in your second year finance courses, maybe first year depending on the school. Not everyone does that obviously, but as Reddit does - it's all too common to see hyper confident people on this subreddit expressing ideas that are just completely at odds with the most basic aspects of finance/econ.
OddlyFactual1512 | 13 hours ago
You don't even realize that you just said the free market doesn't apply.
RIP_Soulja_Slim | 12 hours ago
I'm not sure how you read anything above and came to that conclusion but no that wouldn't be accurate nor implied anywhere. I'll start from the beginning, presuming you've not taken any intro coursework regarding yields.
Perhaps exploring these concepts would be helpful:
https://en.wikipedia.org/wiki/Expectations_hypothesis
https://en.wikipedia.org/wiki/Forward_rate
https://cf.com/insights/what-is-a-forward-curve
And commentary on current constructs:
https://www.stlouisfed.org/on-the-economy/2025/oct/understanding-swoosh-shaped-yield-curve-treasuries
https://www.federalreserve.gov/econres/notes/feds-notes/why-have-far-forward-nominal-treasury-rates-increased-so-much-in-the-past-few-years-20260212.html
Hope that helps, but to summarize yes forwards rates and the entire curve are generally 100% a product of expectations around short rate movements, and no that's not at odds at all with the idea of a market driven yield.
OddlyFactual1512 | 12 hours ago
Yields are 100% determined by the free market. Expectations about rates are in line with expectations about inflation, because the market expects The Fed to act rationally and in line with inflation expectations.
Ask yourself what would happen if rates were at 7% for a year or two and the Fed announced that they were likely to cut rates from 7% to 0% at the next meeting.
RIP_Soulja_Slim | 12 hours ago
Very much suggest reading the links I provided above, I think you'd learn a thing or two!
OddlyFactual1512 | 12 hours ago
Take Econ 101 and get back to me
RIP_Soulja_Slim | 12 hours ago
I'll never understand why so many people do this here. It's not that serious of a mistake, I posted a bunch of sources for you to learn from, many of which are covered in intro econ (yield construction is more of an intro finance thing, but w/e, you'd only know that if you took those courses I suppose...). And like a lot of laymen, rather than being interested in expanding your understanding of a given topic - it's this lol.
Good luck out there.
OddlyFactual1512 | 12 hours ago
Read your last 3 comments prior to mine and let me know how your condescension is OK, but mine isn't. Also, I'm not a layman. The problem is you think YOU are the expert and everyone that disagrees with you is a "layman". In other words, maybe nobody likes you because of your superiority complex.
nicetriangle | 13 hours ago
It's gonna be real interesting to see what that new fed chair does. He seems to be 100% in the administration's pocket and the administration has been crying about how we need to cut interest rates since day one. I feel like a big rate cut would be a massive self own by the US.
RIP_Soulja_Slim | 12 hours ago
FWIW, the futures market is pricing in rate hikes at the moment. New information over time will certainly change things, but institutional money is betting in the opposite direction in a fairly large way.
CornerOne238 | 14 hours ago
Bonds will take a dive once inflation picks up even more. Ppi yoy was 6%, once that transfers to cpi expect 10 rates even higher.
brianishere2 | 13 hours ago
Trump's policies, plus unnecessarily picking seriius fights with almost every legitimate ally overseas, will cause our future government budgets to swell. He is taking on massive debt with nothing in exchange. An example: More than $2 trillion in deficit spending this year to grow our economy at 2%, right? How much is 2% about $650 billion. His reckless spending and endless tax cuts for the rich are harming us. Now the increased interest rates will add to the interest payments on our enormous debt, which is already about $39 trillion and will eclipse $40 trillion this year. Remember Trump also wants to add more than $500 billion (half of $1 trillion) to our annual budget for defense.
CheetahDry8318 | 13 hours ago
Yup, this also causes harm to allies. They too have to take measures to boost their economies and in turn screw their balance sheets. They will think twice before increasing alliance again.
Zealousideal-Bus4712 | 12 hours ago
they've lost control of the long end of the curve. look at what's happening in the UK, 30-year GILT is pushing up past 6%. this is not good. most likely a full financial reset / repricing coming in the next 5 years (we're already seeing the beginnings with this massive equities appreciation).
Only-Worldliness2006 | 4 hours ago
The whole idea that a US treasury is a "risk free" rate of return is starting to evaporate very quickly to say the least
ValdezX3R0 | 14 hours ago
Isn't 5% on the 10-yr seen as a doomsday scenario? Rate has been slowly ticking up towards that since we started doing stupid shit in the ME again.
No-Violinist260 | 13 hours ago
Doomsday scenario for what? It's not good for our national debt as it costs a lot to service it. It's also not good for anyone getting a house or car loan any time soon.
The fed only controls the overnight (short term) rates. This has an effect on the 10-year, but it's not the only thing that moves this needle. Right now the fed has held steady on short term rates but the market is pricing higher bond yields because they think rates will rise in the future, they require more more premium for the amount of risk, or a combination of the two.
morbie5 | 12 hours ago
> he fed only controls the overnight (short term) rates
If they want/need the fed can buy longer term bonds
No-Violinist260 | 11 hours ago
True, but this doesn't necessarily lower rates. This signals to investors that there's not enough demand at these prices so the fed has to step in and buy at what the treasury is selling at.
morbie5 | 9 hours ago
Correct. So it depends on how the fed handles things if/when they step in. If they say something like "we are going to be buying longer term bonds but only temporarily until the congress and the executive cut spending/raise taxes or change other policies" then I think the market would see that as welcome news
ValdezX3R0 | 13 hours ago
I thought I remember Trump commenting on the 10yr reaching 5% being very bad during his initial tariff disaster, which was part of why he backed off.
ConshyCurves | 12 hours ago
It hit 4.5% at its peak during that whole event around the tariffs. That was what made him back off. From my understanding, there was so much deleveraging over the rapidly crashing stock market that many funds needed to dump treasuries all at once to raise cash, which made rates jump like 30-40 bps in like 2 days.
The last time it hit 5% was very briefly in October 2023, but it did cool back to the low 4%s by mid-winter.
SimpleLifeNomad | 12 hours ago
And a week from now it will be below 5% again. Doomer-click-bait as always. Everyone wants Trump, understandably, to fail, so every little thing will be blown up 10x for the clicks.
Everyone salivating for that financial collapse that will be Trump and MAGAs undoing.
_lIlI_lIlI_ | 11 hours ago
> veryone wants Trump, understandably, to fail, so every little thing will be blown up 10x for the clicks.
I don't understand the point you're making, you think if this didn't happen under trump, people wouldn't report on it? Before 2025 the last time it hit above 5% was 2007. With that in mind, do you think that's not significant to report on, even if it is the 3rd/4th time since 2025 it has happened?
dust4ngel | 5 hours ago
> so every little thing will be blown up 10x for the clicks
not sure that having to service $39T of debt at 5.1% is a little thing
devliegende | 3 hours ago
Only new debt will have to be served at 5.1%. Existing coupon rates do not change.
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