Bond Markets Are Breaking the Fed's Rate Control!

The Federal Reserve's most powerful tool — the federal funds rate — is losing its grip on the broader economy. While the Fed cut rates by 100 basis points across three moves in late 2024 and continued easing into 2025, the 10-year Treasury yield barely budged, leaving mortgage rates stubbornly pinned between 6.8% and 7.1% throughout an official easing cycle. Bond investors are no longer simply following the FOMC's lead; they're pricing US debt against a $37.6 trillion national debt load, $1.2 trillion in annual interest payments, and a Congressional Budget Office projection of $2 trillion-plus deficits every year for the next decade.

The decoupling has real consequences.