Why are long-term interest rates going up when the Fed is cutting rates, see the first chart? Is the market worried about growing Treasury issuance, or about a new Fed leadership effectively raising the inflation target from 2% to, say, 4%?
The reality is that about a year ago, long-term interest rates started drifting higher than what would have been predicted by short-term interest rates and oil prices, see the second and third charts.
This pattern of rising long-term interest rates is highly unusual when we look at the historical reaction during Fed cutting cycles, see the fourth chart.
The bottom line is that the yield curve continues to steepen, and investors across all asset classes need to think about why, see the fifth chart.
Sources: Federal Reserve, US Department of Treasury, Macrobond, Apollo Chief EconomistSources: Haver Analytics, Apollo Chief EconomistSources: Bloomberg, Macrobond, Apollo Chief EconomistNote: 2001 is from Jan 2001 to June 2003, 2007 is from September 2007 to December 2008, 2019 is from August 2019 to March 2020 and 2024 is from September 2024 to December 2025. Sources: Haver Analytics, Apollo Chief EconomistSources: Bloomberg, Macrobond, Apollo Chief Economist
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