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Interest Rates
Bonds performed well last month as
interest rates slipped moderately due
to the Fed cut. The market is now
about 98% certain that the Fed will cut
interest rates again on 10/29, and this
likelihood is a headwind for yields. Still,
we shouldn't expect (or even desire)
Fed rate cuts of more than 100-150
basis points over the next year. Massive
rate cuts would be caused by either a
recession or potentially poor
policymaking that could ultimately
inflame inflation. We're unlikely to
return to the ultra-low zero-ish Federal
Funds rate seen during the pandemic
and also found after the Great Financial
Crisis. The rates market currently
expects one or two more Fed cuts this
year, according to Bloomberg.
Source: Bloomberg; Envestnet Quantitative Research Group (QRG).
Sep. 30, 1981
15.84%
4.15%
1.13%
-5%
0%
5%
10%
15%
20%
9/1965 9/1970 9/1975 9/1980 9/1985 9/1990 9/1995 9/2000 9/2005 9/2010 9/2015 9/2020 9/2025
Nominal 10-Year Treasury Yield
Real 10-Year Treasury Yield
20251003-4872948
