The 10-year Treasury yield is up by 5 bps, recovering from a 4 bps drop on Thursday that was spurred by rising Consumer Price Index (CPI) inflation and initial jobless claims. Meanwhile, the S&P 500 (SPX) clinched an all-time high of 6,594.54 today, potentially signaling a risk-on attitude ahead of the September 16-17 Federal Open Market Committee (FOMC) meeting.
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Forget margin or options. Here's how the pros trade QQQWith the market at record highs, investors may be selling bonds in favor of stocks. A bond’s price and yield move in opposite directions. In other words, a bond’s yield rises when investors push its price lower by selling.
10-Year Treasury Yield in Focus as Fed Prepares to Cut Rates
The Fed is widely expected to slash rates by 25 bps next week. The 10-year yield is affected by the federal funds rate, although the two don’t carry a direct correlation. Even with the Fed set to cut rates, the 10-year yield isn’t guaranteed to fall. Instead, the yield moves based on long-term expectations for economic growth and inflation.
That means investors are weighing the Fed’s action against broader economic signals, including inflation and labor market data. How the 10-year yield moves in the coming days could set the tone for both stocks and bonds heading into the FOMC meeting.
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