The Fed may control short-term interest rates, but market forces determine longer-term rates. In an October 24, 2024, Barchart article on the U.S. bond market, I concluded:
The Fed has taken the pressure off short-term interest rates and has told markets they will continue an accommodative path. However, the bond market is ignoring the central bank as longer term rates are a function of market sentiment determined by the domestic and foreign economic environment. The bottom line is that the bond market is screaming that the issues facing the U.S. financial system, the geopolitical landscape, and uncertainty over U.S. policy following the November election require higher rates as the U.S. government’s credit rating remains under pressure. Lower short-term rates do not guarantee that longer-term interest rates will decline.
