Long-Term U.S. Rates Might Still Rise
There are too many potential risks that could lead to a reacceleration in U.S. inflation and consequently higher interest rates in the longer term, said SEI’s Jim Smigiel.
This means U.S. Treasury yields could rise further. “The bond market seems to share our concerns, as long-term U.S. yields have risen roughly 90 basis points since the Federal Reserve pivoted to lower interest rates with a surprising 50-basis-point cut in mid-September of 2024,” the chief investment officer said in a note.
Money markets currently price 37 basis points of interest-rate cuts by the Fed this year, according to LSEG data. Rate-cut expectations have risen from around one cut of 25 basis points priced before Wednesday’s U.S. inflation data.