(Bloomberg) — The last time US government bonds sold off this much as the Federal Reserve started cutting interest rates, Alan Greenspan was orchestrating a rare soft landing.
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Two-year yields have climbed 34 basis points since the Fed reduced rates on Sept. 18 for the first time since 2020. Yields rose similarly in 1995, when the Fed — led by Greenspan — managed to cool the economy without causing a recession. In prior rate cutting cycles going back to 1989, two-year yields on average fell 15 basis points one month after the Fed started slashing rates.
Rising yields “reflect the reduced probability of recession risks,” said Steven Zeng, an interest rate strategist at Deutsche Bank AG. “Data has come in pretty strong. The Fed may slow the pace of rate cuts.”
The latest backup in yields shows how a resilient US economy and buoyant financial markets limit the options for Fed Chair Jerome Powell to…
