Rick Santelli. Rick, kind of like the stock market, the bond market's probably used to it at this point, but at what point does it start to matter. >> You know, I can't even guess at what point it starts to matter, but as previous guests have been saying all morning, uh, pretty much we've seen this all before.It is a kabuki dance to some extent, but of course, if it lasts a a certain amount of time, and I'm not sure what that timeline is, the markets might pay some attention. But today they paid a whole lot ...

For decades, the 60/40 portfolio was the epitome of the balanced portfolio. The allocation of 60% stocks and 40% bonds has traditionally been seen as an all-weather portfolio, with the volatility of stocks balanced by the more conservative, defensive nature of bonds. And, historically speaking, this has generally been the case. According to Emelia Fredlick, a senior editor for Morningstar, there has been only one time in the past 150 years that the 60/40 portfolio experienced more pain than the stock mark ...

All right. So, you put the odds of a shutdown at 70%. Why do you see this as uh such a high probability event possibly coming up and we know that the top congressional leaders are meeting with the president today and there are there are some bipartisan interest to avoid this shutdown.>> Yeah, that's exactly right. And I would say that my 70% odds are actually low versus Hill staff that I speak with for the last several weeks. I've been polling members of the House and the Senate D's and Rs saying, you know, ...

Core Viewpoint - The discussion centers around the current state of the bond market, particularly the yield on the 10-year bonds, which has recently increased despite anticipated rate cuts by the Federal Reserve. Concerns are raised about the implications of aggressive rate cuts on inflation and the long end of the bond market [1][2][4]. Bond Market Analysis - The yield on the 10-year bonds has risen from 3.98% to approximately 4.13%-4.14%, indicating a potential overreaction in the long end of the bond market [2]. - The expectation is for the Federal Reserve to implement two more rate cuts in October and December, which may not be favorable for long-term bonds or inflation [2][19]. - The bond vigilantes are anticipated to re-emerge, reflecting concerns about the Fed's aggressive rate-cutting stance [4]. Federal Reserve's Strategy - The Federal Reserve's current focus appears to be on employment rather than inflation, with the next employment report being crucial for future decisions [14][19]. - There is skepticism regarding the logic behind significant rate cuts when the economy shows signs of strength, as indicated by GDP growth [3][19]. - The Fed's independence is emphasized, with the current leadership expected to maintain its course despite political pressures [6][8]. Economic Indicators - The upcoming jobless claims report and inflation data are critical for assessing the Fed's dual mandate and future rate decisions [14][15]. - Concerns are raised about the impact of tariffs and immigration on employment, which could hinder hiring despite a stable economic outlook [17]. Equity Market Perspective - Despite record highs in equity markets, there is a cautious stance on equities due to concerns about being in a bubble, with institutional investors reportedly 28% overweight in equities [21]. - The recommendation is to avoid equity markets until at least mid-October for a clearer market outlook [22].

Group 1 - The Federal Reserve has begun cutting the federal funds rate, leading to market excitement and expectations of more cuts by year-end [1] - Current average mortgage rates for a 30-year loan are at 6.26%, which has deterred many potential homeowners and investors [1] - Rate cuts are expected to lower mortgage rates, but the relationship between federal funds rate and mortgage rates is not direct, as lower borrowing rates may also increase housing prices [2][3] Group 2 - The federal funds rate influences lenders' offerings and housing demand indirectly, as mortgage rates are more closely tied to Treasury yields and the bond market [3] - The impact of the Fed's rate cuts on Treasury bonds will take time to materialize, potentially delaying the effects on mortgage rates until early 2026 [4]

Mortgage rates, meantime, on the move after yesterday's rate cut. Let's get straight to Diana Ol for the latest. Diana.>> Well, Melissa, as we discussed on Tuesday before the Fed cut, mortgage rates could go up and they did. They went up 15 basis points this morning, adding to nine basis points that they rose yesterday, making 24 basis points specifically since the Fed cut its rate. And that all according to Mortgage News Daily.Now, that's because, you know, as many experts weighed in, they expected that pe ...

Market Outlook and Fed Policy - The market is pricing in two more rate cuts, but uncertainty remains regarding whether these cuts will actually occur [1] - The Fed's dot plot suggests three cuts, while the market anticipates two and a half, creating a discrepancy in expectations [2] - The Fed's outlook on the economy is weaker than previously indicated, setting up a "good news, bad news" scenario: potential rate cuts versus a weaker economy impacting earnings [2][3] - The market may be experiencing a "calm before the storm," with potential for a kitchen sink quarter in Q4, especially considering the performance of the S&P 500 excluding the Magnificent 7 [3][4] Risk Management and Market Sentiment - The Fed's use of "risk management" in the context of rate cuts is perceived by some as a hawkish signal, leading to a flattening of the yield curve [4][6][8] - Despite concerns about the labor market, spending remains strong, creating a complex economic picture [5][6] - Options market activity shows a spike in put buying after the rate cut, indicating that some traders are protecting against downside risk [9][10] - The rate cut eases valuation stress on the Magnificent 7, but also provides an opportunity for those with a bearish view to protect their positions [11] Investment Strategies and Asset Allocation - Diversification across asset classes is crucial, including considering opportunities in the bond space [13] - Interest rate volatility is highlighted as a potential diversifier within fixed income markets, trading around three basis points a day [14] - Investors should be mindful of embedded optionality within bond portfolios, such as prepayment risk [15][16] - Bond portfolios are currently viewed as more attractive than equities, which are considered neutral at best [17][18] - The current surge in futures is driven by euphoria over the potential for two more Fed cuts, but this may be short-lived, pending the next earnings cycle [19][20][21]

Market Trends & Inflation - The bond market is heavily influenced by inflation, which is currently around 3% and edging higher, creating a stagflationary environment [3] - Inflation trends, rather than Federal Reserve actions, will primarily drive bond yields over the next 6 to 12 months [4] - There's hesitancy in longer-term bonds globally due to large fiscal deficits and concerns about inflation [6][7] Federal Reserve Policy & Impact - The market has already largely factored in the Federal Reserve cutting rates [2] - Cutting rates while the job market slows and inflation remains high presents a challenging situation for the bond market [3] - The Fed reducing its holdings of longer-term bonds raises concerns about whether private investors can compensate [7] - The possibility of the Fed matching its balance sheet maturities with Treasury issuance could impact long-term bond yields [10] - Quantitative tightening (QT) is important because the Fed's balance sheet management significantly influences borrowing costs [9] Mortgage Rates & Yield Curve - A Federal Reserve rate cut does not guarantee a decrease in mortgage rates; they could remain stable or even increase [4][5] - The yield curve may steepen even as the Fed cuts rates, as longer-term yields are influenced by inflation expectations, growth prospects, and supply and demand [5][6] - It's unlikely that mortgage rates will fall below 6% even after the anticipated Federal Reserve rate cut [8]

Group 1 - The current Consumer Price Index (CPI) is at 2.9%, which is above the Federal Reserve's target of 2% [2][3] - Inflation is expected to continue accelerating due to higher tariffs and immigration policies affecting labor markets [3] - The job market is experiencing stagnation, with flat job growth, which may lead to interest rate cuts by the Federal Reserve [4][10] Group 2 - If CPI comes in lower than expected, it could open the door for a 50 basis point rate cut, which the market may react positively to [6][7] - The bond market is closely monitored by the Federal Reserve as it reflects investor sentiment regarding future monetary policy [9] - There is a possibility of six rate cuts priced in by the end of 2026, reflecting concerns about job market weakness and persistent inflation [11][12]

Labor Market Analysis - The bond market anticipates a non-farm payroll number around 100,000; exceeding this figure might counter the previous month's negative revision of -258,000 [1] - A non-farm payroll number below 50,000 could increase the likelihood of a 50 basis point rate cut by the Federal Reserve [3] - The speaker notes that the non-farm payroll data may not be entirely accurate, but it is the primary information available for analysis [2][5] Bond Market and Interest Rate Expectations - Two-year Treasury yields were at 396 basis points and 10-year yields were at 438 basis points before the previous month's non-farm payroll report [4] - Since the last report, the two-year and ten-year yields have moved mostly sideways to slightly lower [4] - The market will closely watch the upcoming non-farm payroll report, despite potential inaccuracies, as it is the key data point available [5]