The bond market isn’t buying President Donald Trump’s idea that faster rate cuts will send bond yields sliding down and, in turn, slash the rates on mortgages, credit cards and other types of loans. https://t.co/ctnm7178mT ...

Market Trends - US Treasuries market sees increasing demand for options as traders seek protection against a sharp drop in 10-year bond yields below 4% [1] - A drop in 10-year bond yields below 4% could trigger a broader rally across the bond market [1]

Core Viewpoint - The ongoing government shutdown is influencing bond yields, with a trend of decreasing yields observed since the beginning of the year, raising questions about future yield directions [1]. Yield Analysis - The analysis of various bond maturities (2-year, 5-year, 10-year, and 30-year) suggests a potential downward trend in yields, particularly for the 2-year bonds, which may indicate a topping out formation [2][3]. - The 5-year bonds exhibit similar characteristics to the 2-year bonds, indicating a potential break in trend that aligns with historical lows from 2020 [3]. - The 10-year bonds are also showing signs of a potential trend break, suggesting a similar downward trajectory as observed in shorter maturities [3]. - The 30-year bonds are noted to have a "perfect double top" formation, indicating a critical point that could lead to a breach, further supporting the notion of declining yields [4]. Investment Sentiment - There is a sentiment shift towards buying bonds, as the current setup is perceived as unfavorable for yields, indicating a potential opportunity for investors [4].

Government Shutdown Impact - Bond market is expected to react to a government shutdown, potentially leading to increased bond yields due to uncertainty about the Federal Reserve's actions [2] - A prolonged government shutdown could shave approximately 10 basis points off the GDP each week [5] - Historically, markets have shown an average increase of 1% the week before and 4% the week after government shutdowns [6] Market Seasonality and Federal Reserve - Historically, September tends to be a negative month for the S&P 500, but this pattern has not been observed this year, shifting focus to October and the Federal Reserve's actions [7][9] - In years where the market is up 15-20% in the first three quarters, the fourth quarter typically sees returns of around 5-5% [8] - The market is waiting to see what the Federal Reserve actually does in October [9] AI and Technology Stocks - Nvidia is considered a strong player in the AI trade, with potential growth in quantum computing and robotics [11] - The AI trade is still in its early stages, driven by corporate spending on chips to compete for the future [14] - The performance of the Magnificent Seven (Mag7) stocks post-Federal Reserve pause and interest rate cuts is being compared to historical patterns [15]

Market Trends & Outlook - Deutsche Bank CEO expects bond yields to remain elevated in coming months [1] - Governments across the world are struggling to implement reforms and fiscal discipline [1]

Interest Rate & Fed Policy - Potential changes in the Federal Reserve leadership, including the possibility of Lisa Cook being replaced, could influence the market's perception of interest rate policies [1] - The market anticipates that President Trump will appoint someone who favors lower interest rates when Powell's term ends next year [2] - The yield curve is steepening due to expectations of short-term rate cuts, which ironically could increase inflationary pressure in the long run [3] - The focus is on whether inflation is under control, given that governments globally have significant debt and desire lower yields to reduce debt servicing costs [8] - Rate cutting cycles have historically been negative for the equity market, with major corrections or bear markets occurring in six out of the last eight instances [9][10] Inflation & Bond Market - Despite pressure to lower rates, inflation may persist and could become a long-term issue [4] - The gap between the 2-year and 30-year Treasury yields has widened to its largest in several years [4] - If rate cuts stimulate inflation, long-term yields are expected to rise [7] - The bond market may challenge the Fed's policies by selling off, leading to higher yields [13] Global Economic Context - The trend of focusing on inflation being not under control and governments having massive debt piles is happening globally [8] - The Bank of England cut rates, but now they have inflation at an 18-month high, and bond yields have been rising [11] - There is a good chance that a rate-cutting cycle could be initiated because things are breaking down globally [12]

Market Trends - US short-dated bonds yields are near their lowest level in more than three months [1] - Traders are convinced that the Federal Reserve will cut interest rates next month [1]

Interest Rate and Bond Market - The market anticipates potential rate cuts by the Federal Reserve, influenced by Powell's testimony, which outlines paths to rate cuts, contingent on factors like tariffs [3] - Without tariffs, rates could potentially be 100 basis points lower, influencing bond yields [4] - The Fed might consider a smaller rate cut in September, followed by a potentially larger cut, depending on upcoming data [4] - Faster and sooner rate cuts by the Fed could lead to rising yields [5] Treasury Market and Foreign Buyers - Concerns about foreign buyers stepping away from treasuries have diminished amidst the equity rally [6] - There's still pressure on the long end of the yield curve due to the budget bill, energy shocks, and tariffs, potentially leading to higher yields [6] - The current counter-rally might be driven by domestic players and technical factors, but the underlying story of pressure on the long end hasn't fundamentally changed [6] Dollar and Currency Dynamics - The dollar is near a three-year low, potentially due to relief in markets benefiting other currencies [7] - Currencies benefiting from tariff or geopolitical relief tend to rally, while the dollar weakens [8] - If treasuries face more pressure, the dollar is likely to weaken [8]