Markets have been predicting another rate cut for weeks, but bond yields have been rising. The 10-year Treasury yield has steadily risen in recent weeks, and ticked up to 4.2% on Wednesday. Bond markets are telegraphing concerns about more inflation in the coming year. Markets think a rate cut on Wednesday is nearly a foregone conclusion, but bond yields are doing something strange. Despite a cut being priced in for weeks, US government bonds have been selling off, driving yields higher. The 10-y ...

Core Viewpoint - The dismissal of Federal Reserve governor Lisa Cook by President Trump over alleged mortgage fraud has led to market volatility, raising concerns about the independence of the Federal Reserve and its implications for monetary policy [1][6][7]. Market Reactions - Stock markets and bonds experienced a sell-off following the announcement, with US government bond yields rising, particularly the 30-year bond which surpassed 5.6%, nearing a 27-year high [3]. - The dollar initially dropped nearly 0.4% but largely reversed this decline, while gold prices spiked by 1% and maintained most of the overnight gain [4]. Federal Reserve Implications - Cook's potential dismissal would create another vacancy on the Federal Reserve board, which Trump is expected to fill with an economist favoring interest rate cuts [3]. - The current situation raises concerns about "intensifying fiscal dominance risks" within the Federal Reserve, as noted by Deutsche Bank forex strategist George Saravelos [7]. Independence of the Federal Reserve - Analysts suggest that Trump's actions may undermine confidence in the Federal Reserve's independence, which is crucial for maintaining transparent and rules-based capital markets [6]. - The attempted removal of Cook is described as unprecedented, potentially signaling the end of central bank independence in the US [7][8].