Opportunities in medium-term bonds as US yield curve steepens
Medium-term yields may drift lower as the Fed cuts rates, but likely in smaller magnitudes relative to each cut
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THE US Federal Reserve delivered two 25 basis point cuts in September and October. The latest move came amid a since-concluded US government shutdown, which temporarily contributed to gaps in inflation and employment data.
Markets quickly latched onto Fed chair Jerome Powell’s comments in October that a December rate cut was “not a foregone conclusion – far from it”.
The data gaps during the shutdown heightened uncertainty over the US economic outlook and likely contributed to his cautious tone. Other Fed officials have since pushed back against expectations for aggressive cuts, citing lingering inflation risks.
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