FED CUTTING INTO RISING YIELDS INTO RECESSION

• Fed Cuts Into Yield Spike

• We Aren’t In Monetary Dominance Anymore

• Crack-Up Boom Potential

• Recession Impact On Dollar

This is in follow up to RECESSION INTO ALL TIME HIGHS - Part 1

Fed Cuts Into Yield Spike

As I warned last Sept 18th 2024 just before the surprise rate cut of 50bp: “TIME FOR A YIELD SPIKE”.

The 10Y continued to rise 100bp over the next few months - some say pricing out recession risk (bonds falling), but I never bought that. It was a sign that Fiscal Dominance had weakened the Fed anchor and term premia would rise.

Fast forward, it has been a year since Fed has cut. What is to stop the longer-end yield from ramping like last time? Only Recession or risk of one. And even then, I think longer-duration yields stay very firm. In fact, it seems more and more likely that US yields can rise even into a recession.