BILS - Mythbusters: The Treasury Yields Episode
2024-02-14 20:16:00 ET
Summary
- There is a belief that whatever happens to the Fed Funds Rate will be passed along to the Treasury yield curve in a similar fashion.
- A maturity structure that is not too far removed from the Fed Funds Rate will be anchored and directly linked to trends in overnight money.
- Just because the Fed may cut rates later this year, it doesn’t necessarily mean the UST 10-Year yield will move down in lockstep fashion.
By Kevin Flanagan, Head of Fixed Income Strategy
The last few years have presented interesting challenges for bond investors. In 2022 and 2023, fixed income portfolios were faced with how to position for what ended up being historic rate hikes. But now, the pendulum has shifted, and the investment profile has moved to how to position one’s bond allocation for rate cuts. Against this backdrop, I thought it would be useful to offer readers insights on how Treasury ((UST)) yields operate, especially in relation to the Fed Funds target....
Mythbusters: The Treasury Yields Episode