Core Insights - The article discusses the puzzling behavior of bond yields in the context of the Federal Reserve's rate cuts, highlighting a disconnect between expected outcomes and actual market reactions [2][4][5]. Group 1: Federal Reserve Actions - The Federal Reserve began easing rates last September, with a total reduction of 1.5 percentage points expected to continue through 2025 [4]. - A further quarter-point rate cut is anticipated, with traders pricing in additional cuts in 2026 [4]. Group 2: Bond Market Reactions - Despite the Fed's rate cuts, the 30-year Treasury yield is around 4.8% and the 10-year yield is approximately 4.17%, both of which have risen over the past month [6]. - Higher yields are impacting borrowing costs across the economy, contrary to the administration's goal of lowering mortgage rates and business loan costs [7]. Group 3: Investor Sentiment and Economic Factors - Investors are concerned about shifts in trade policy and increasing national debt, leading to a sell-off in government debt and rising yields [8]. - Historically, deficits have had minimal impact on Treasury yields due to the U.S.'s economic dominance, but current trade dynamics may be altering this relationship [9]. - Higher yields indicate that investors are demanding greater compensation for risks associated with rising deficits and policy uncertainties, reflecting skepticism about the Fed's continued rate cuts amid persistent inflation [11].