This Is The Problem
The 3-month Treasury bill’s equivalent yield has plunged, absolutely plunged. It was 1.45% last Thursday. Today? All of 45 bps. A one-hundred basis point drop in six trading sessions. One hundred. Six days.
Rate cuts, right? Sure, that’s the premise. Like eurodollar futures, the front end of the yield curve is saying that there are more of them coming. The Fed’s unscheduled fifty will be augmented by another fifty at the next FOMC meeting in a few weeks. If not sooner.
The rest of the yield curve, though, there’s a little more to it. For the first part, the long end is all about consequences. As in, if rate cuts were expected to be effective then, cue Janet Yellen in 2011, bond yields would be rising sharply. They are not, to put it mildly.