{"id":2958,"date":"2026-06-25T22:11:15","date_gmt":"2026-06-25T22:11:15","guid":{"rendered":"https:\/\/reliablemovingcrews.com\/?p=2958"},"modified":"2026-06-25T22:11:15","modified_gmt":"2026-06-25T22:11:15","slug":"us-bond-market-expects-rate-hikes-the-fed-may-never-deliver","status":"publish","type":"post","link":"https:\/\/reliablemovingcrews.com\/?p=2958","title":{"rendered":"US bond market expects rate hikes the Fed may never deliver"},"content":{"rendered":"<div>\n<div>\n<div>\n<ul>\n<li>Summary<\/li>\n<\/ul>\n<\/div>\n<div><\/div>\n<\/div>\n<div>NEW YORK, June 25 (Reuters) &#8211; The U.S. Federal Reserve is becoming tougher for Wall Street to forecast, with dramatically different views \u200bon where monetary policy is headed.<\/div>\n<div>Traders in rate futures are pricing in at least one Fed hike by early autumn and another next year. That&#8217;s in \u200csharp contrast to what some asset managers expect, that the central bank will hold rates steady or eventually cut, citing potentially easing inflation as oil prices decline and the labor market softens in the second half of 2026.<\/div>\n<div>&#8220;The market is way too aggressive in pricing rate hikes, mistaking that oil inflation pushing through food prices and everything else will persist,&#8221; said Byron Anderson, head of fixed income at Laffer Tengler Investments.<\/div>\n<div>Anderson said \u200bthat recent inflation pressures are largely energy-driven and likely to reverse as the oil supply normalizes. With wage growth easing and housing stagnating, Anderson forecasts disinflationary pressure in the coming \u200bmonths, reducing the need to raise rates.<\/div>\n<div>The Fed&#8217;s hawkish rhetoric has flattened the yield curve \u2014 the gap between short\u2011term and long\u2011term rates, and a \u2060key barometer of economic expectations \u2014 unraveling earlier market bets on a steeper curve established before Fed Chair Kevin Warsh took office in late May.<\/div>\n<div>A flatter yield curve, where shorter-dated bond \u200byields rise faster than those on long-term maturities, reflects expectations the Fed will not lower interest rates anytime soon or may even raise them on concerns of elevated inflation.<\/div>\n<div>&#8220;The curve reflects Warsh&#8217;s \u200bfirm commitment to bring down inflation to the Fed&#8217;s 2% long-run target,&#8221; said Chip Hughey, fixed-income managing director at Truist Wealth. &#8220;That should keep short-dated yields elevated near current levels longer.&#8221;<\/div>\n<div>The uncertain inflation path is reflected in the wide divergence in interest rate outlooks among banks. Citi expects the Fed&#8217;s next move to be a cut, projecting a 25-basis-point reduction as soon as October. BofA Securities, in contrast, expects three 25-basis-point rate increases \u200bthis year.<\/div>\n<div>This disconnect in outlook has important implications for the Treasury market, analysts said. Elevated rate expectations have already pushed front-end yields higher. If the Fed holds rates steady indefinitely, but \u200bcuts rates eventually, investors in intermediate and longer maturities should benefit.<\/div>\n<div>During easing cycles, shorter-dated yields tend to fall first, prompting investors to move further out the curve to lock in higher long-term rates. Longer-dated debt has historically \u200coutperformed shorter-duration \u2060Treasuries during Fed rate-cut periods.<\/div>\n<div>Overall, bond investors have raised their neutral positioning following the Fed&#8217;s hawkish shift last week, underscoring a general belief that the central bank will keep rates unchanged. J.P. Morgan&#8217;s latest Treasury Client Survey showed neutral positioning in Treasuries rising to 56% among its active clients, the highest since late March.<\/div>\n<div>To maintain a neutral position means aligning a portfolio&#8217;s duration with that of its benchmark. If the benchmark duration is five years, for example, a neutral stance would involve holding fixed-income securities with 5-year maturities, or close to it.<\/div>\n<div>&#8220;If you think about \u200bwhat happens when you have oil price \u200bshocks, historically, it has not been inflation \u2060that&#8217;s been the big concern,&#8221; said Lori Heinel, global chief investment officer at State Street Investment Management, who thinks the Fed will likely cut by early 2027 and hold rates for the rest of the year.<\/div>\n<div>&#8220;It has been the drawdown on growth that has seen the big impact \u200bfrom any kind of oil shock&#8230; Our best guess is that growth will be a challenge.&#8221;<\/div>\n<h2>TERM PREMIUM<\/h2>\n<div>A deeper structural shift is also \u200bunderway at the Fed as \u2060it moves away from explicit forward guidance.<\/div>\n<div>Amrut Nashikkar, managing director and head of derivatives strategy at Barclays, noted that without the Fed&#8217;s clear messaging, markets are increasingly pricing 50-50 outcomes at individual meetings. That implies greater uncertainty and higher volatility around Fed decisions.<\/div>\n<div>Forward guidance has been known to curb volatility and suppress term premiums by anchoring expectations, Nashikkar said. Removing it should cause a rise \u2060in the \u200bcompensation investors demand for holding longer-dated bonds, which means long-end yields could remain elevated even if inflation recedes.<\/div>\n<div>&#8220;Warsh made \u200bit clear that &#8216;markets work less efficiently&#8217; when they reflect the Fed&#8217;s views back,&#8221; said Guneet Dhingra, head of U.S. rates strategy at BNP Paribas. &#8220;In theory, this gives the market a free hand to price a policy path based on \u200beconomic data. In practice, this freedom for markets comes with a cost: higher risk premiums, a bigger risk of tail outcomes and ultimately, more volatility.&#8221;<\/div>\n<\/div>\n<p>Read more <a href=\"https:\/\/reliablemovingcrews.com\/?p=2956\">King Charles will not live at Buckingham Palace after refit, officials say<\/a><\/p>\n<p>Read more <a href=\"https:\/\/reliablemovingcrews.com\/?p=2954\">On the streets and in hospitals, Venezuelans scramble to save lives after quake<\/a><\/p>\n<p>Read more <a href=\"https:\/\/reliablemovingcrews.com\/?p=2952\">What does Bayer\u2019s US Supreme Court win mean for the thousands of Roundup lawsuits?<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. Federal Reserve is becoming tougher for Wall Street to forecast, with dramatically different views \u200bon where monetary policy is headed.<\/p>\n","protected":false},"author":1,"featured_media":2957,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-2958","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - 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