T-yields continue to decline post Fed’s interest rate pause

Treasury yields are experiencing a downtrend following the Fed’s decision to continue with a rate pause following its November FOMC meeting. The 10-year yield dropped over 10 basis points, suggesting that market participants are pricing in a Fed likely done with policy hiking.

The US yield curve has been well off its highs since 2007, with a 5% drop since 2007. The market remains within the upward sloping trend channel on a year-to-date chart, but Blikre highlights changes over the last three months.

Data from yesterday, including the Treasury announcement, net Spy returns, and the post-Fed day, trended down. The red line, which usually happens from 2:00 to 4:00 PM, goes back to 2022, where this downtrend has occurred.

Although analysts see the opposite trend in stock and bond volatility, the post-Fed day has also been trending downward. Bonds and stocks both fell, but the market is supported on the two-month chart, indicating that risk markets are heading in the right direction. The market’s expected recovery may not materialize in the next week or two, according to analyst predictions.