Why are long-term Treasury yields increasing when the Fed is cutting rates?

Long-term yields have detached from short-term rates and other historical indicators, suggesting complex market dynamics beyond typical Fed policy responses.

What does a steepening yield curve mean for investors?

A steepening yield curve can signal rising inflation expectations or increased investor demand for higher compensation for long-term risk.

Has the relationship between oil prices and Treasury yields changed?

Yes, a long-standing correlation between crude oil prices and long-end Treasury yields appears to be unraveling, adding to market complexity.

Home / Business and Economy / Bond Market Puzzle: Why Long-Term Yields Keep Rising

Bond Market Puzzle: Why Long-Term Yields Keep Rising

12 Dec

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Summary

Long-term Treasury yields have risen since September 2024 despite Fed rate cuts.
The historical link between short-term and long-term yields has broken.
The yield curve is steepening, signaling investor unease with long-dated debt.

Bond Market Puzzle: Why Long-Term Yields Keep Rising

Since September 2024, long-term Treasury yields have defied expectations, trading higher even as the Federal Reserve began cutting its policy interest rate. This unusual pattern has persisted as 2026 approaches, prompting analysis of its implications across asset classes. Notably, the yields on 10-year Treasury notes and 30-year Treasury bonds have moved counter to typical market behavior.

The market is observing a significant break in historical relationships. Normally, a decrease in short-term rates, such as those implied by fed-funds futures, would lead to a corresponding decline in long-term yields. However, this inverse correlation has unraveled. Furthermore, a longstanding connection between long-end yields and crude oil prices has also weakened, adding to market uncertainty and suggesting underlying economic shifts.