CryptoSlate
The Federal Reserve cut the federal funds rate by 100 basis points across three moves in late 2024, then trimmed again into 2025, and the 10-year Treasury yield barely responded. By September 2025, it sat nearly unchanged from a year earlier despite an active easing cycle. That decoupling is the most consequential shift in US monetary policy in a generation, because it is the long end of the curve, not the federal funds rate, that sets mortgage costs, corporate borrowing rates, and the government's own debt service bill.
The cause is volume. Federal debt hit $37.6 trillion as of September 2025, with annual interest payments at $1.2 trillion in FY2025 alone and Treasury issuing $30.2 trillion in marketable securities across the year — 36% of GDP. The Congressional Budget Office projects deficits above $2 trillion annually for the next decade, and $9.1 trillion of maturing securities needed to be refinanced inside FY2025 alone. Bond investors are pricing US debt against that issuance pipeline and the long-term fiscal trajectory, not against the next FOMC decision.
Why it matters
RBC Wealth Management analysts have framed this as a modern inversion of Alan Greenspan's conundrum. Where Greenspan watched long-term yields refuse to rise in the mid-2000s, Powell is watching them refuse to fall. The 30-year fixed mortgage rate touched 6.08% ahead of the September 2024 cut, then spent most of the following year hovering between 6.8% and 7.1% even as the Fed was officially easing. The spread between the 30-year mortgage and the 10-year Treasury, historically 1.5 to 2 percentage points, stretched to 3 points through 2023 and 2024. Buyers who had been waiting for relief watched it vanish in weeks as the bond market repriced the fiscal outlook faster than the Fed could ease into it.
The Fed has also stopped shrinking its balance sheet. After drawing it down by more than $2.2 trillion since mid-2022 through quantitative tightening, the FOMC announced in October 2025 that runoff would cease in December and began purchasing Treasury bills through Reserve Management Purchases to keep money markets functioning. Officials call these technical operations, not QE. In practice, the central bank is once again expanding its footprint in core markets during conditions that do not resemble an acute crisis, which says a great deal about how much structural support the system now needs just to function on a routine basis.
Frequently asked questions
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What does it mean that the bond market has decoupled from the Fed?
The Fed sets the federal funds rate, an overnight interbank rate, but the 10-year Treasury yield is set by bond investors weighing inflation expectations, deficit trajectories, and the volume of new issuance. When those forces move in the opposite direction of Fed policy, long-term yields stop responding to rate cuts…
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Why have mortgage rates stayed high even as the Fed cut rates?
The 30-year fixed mortgage tracks the 10-year Treasury yield, not the federal funds rate. With the 10-year refusing to fall through 100bp of Fed cuts, mortgage rates sat between 6.8% and 7.1% for most of the year following the September 2024 cut, and the historical 1.5-2 point spread to the 10-year stretched to 3…
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How big is the US debt and issuance pressure on bond markets?
Federal debt hit $37.6 trillion in September 2025, Treasury issued $30.2 trillion in marketable securities across FY2025, and $9.1 trillion of maturing securities needed to be refinanced inside the same year. The CBO projects deficits above $2 trillion annually for the next decade.
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What has the Fed done with its balance sheet in response?
After shrinking it by more than $2.2 trillion through quantitative tightening since mid-2022, the FOMC announced in October 2025 that runoff would end in December and began purchasing Treasury bills via Reserve Management Purchases to support money market functioning. Officials call these technical liquidity…
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How does this affect Bitcoin and crypto markets?
Bitcoin's near-term price action has come to track Treasury supply, real yields, and Fed liquidity dynamics rather than crypto-specific demand, with IMF research finding that Fed tightening transmits directly into crypto risk appetite. With the 30-year yield near 5.1% and bond traders now pricing a 2026 hike, the…
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