Bond market keeps the score. Global long rates have risen even as the Federal Reserve cut policy rates aggressively in 2024 and 2025, and that gap matters now because it limits how far political pressure can push policy. Short-term the story will shape today’s trading in Treasuries, bank stocks and rate-sensitive sectors. Longer-term it will govern borrowing costs, investment decisions and the Fed’s credibility in the US, Europe and other major markets. Recent data showing steady incomes and spending and a still-elevated core inflation reading help explain why markets are pricing higher yields than the Fed would like.
Bond market versus presidential pressure
The bond market has been the principal constraint on efforts to force lower borrowing costs. The Fed cut its policy rate by one percentage point in 2024 and by another three quarters of a point in 2025. Despite that, the 10-year Treasury yield rose from about 3.7% on September 18, 2024 to 4.06% when the second wave of cuts began this past September and to roughly 4.27% this morning. That divergence shows that long yields are being set on global markets where investors price future growth and inflation.
Political calls for lower rates have limited influence on those price-setting markets. The president has spoken publicly about wanting substantially lower rates and about the upcoming Fed appointment. Still, global fixed income investors react to growth forecasts, inflation expectations and supply factors more than to rhetoric. That is why market moves have served as a check on sudden policy gambits and why the so-called TACO trade, the idea that market pressure forces policy reversals, has reappeared this week.
Recent macro releases and what they mean for yields
Fresh Commerce Department figures showed solid income and spending growth for October and November and a steady core inflation signal. Personal consumption expenditures rose 0.5% in both months, which translates to roughly 0.3% inflation-adjusted expansion. The Fed’s preferred inflation gauge was up 0.2% in each month and registered 2.8% year over year in November. Those readings imply persistent underlying demand plus a level of price pressure that keeps investors cautious about future inflation.
The Q3 GDP revision to a 4.4% annualized pace from 4.3% reinforces the growth story. In combination, the growth and PCE numbers help explain why longer-term investors are pricing higher yields even as the Fed eases policy. Higher yields reflect both a better growth outlook and the possibility that inflation will remain above target long enough to require tightening if it proves persistent.
Fed chair contest and market signals
The contest to replace Fed chair Jerome Powell, whose term expires in May, has become a market event in its own right. BlackRock executive Rick Rieder, NYSE:BLK, has seen his odds rise sharply in prediction markets after an interview with the president. On Polymarket Rieder moved from single-digit odds ten days ago to roughly 30% this morning, behind former Fed governor Kevin Warsh but well ahead of other candidates whose chances have fallen.
Rieder’s rise reflects investor interest in a leader who understands markets, but he has less public-sector and political experience than other contenders. That matters because investor confidence in a central banker’s willingness to act on inflation can keep long-term yields lower even if near-term monetary policy gets tighter. Markets will watch not only the appointment itself but the signals the nominee sends about credibility on inflation containment.
Market implications for the trading session
For the coming trading session the most immediate focus will be on Treasury yields and the reaction across equities and credit. Higher longer-term yields increase borrowing costs for households and companies and can pressure rate-sensitive sectors. Financials respond to yield moves in complex ways. Banks may benefit from steeper curves in trading desks and net interest margins, yet higher funding costs and volatile markets can offset that benefit.
Investor commentary at the World Economic Forum has underscored the point. Jamie Dimon, chief executive of JPMorgan Chase, NYSE:JPM, noted that the Fed follows market signals when pricing policy actions. That view highlights why liquidity and sentiment in bond markets will be key drivers of asset prices today. Geopolitical headlines and any further comments from the administration about tariffs or force tend to move risk sentiment, but the primary market scorekeeper remains yields.
Traders will also be parsing any follow-up on government steps intended to support demand for longer-term securities. Measures such as directing government-sponsored enterprises to buy mortgage bonds and regulatory nudges that encourage banks to hold more Treasuries change supply and demand dynamics for fixed income. Those actions can influence term premia and affect how far yields move for a given economic surprise.
How to read market signals without taking a position
Watch yield curves, headline PCE momentum and any statements from Fed officials or the administration for information about where markets see inflation and growth heading. Rising long yields alongside steady core inflation suggests markets expect stronger growth or persistent inflation. If yields drift higher after economic releases, the market is recalibrating future inflation and growth expectations. If yields fall despite persistent core readings, investors are signaling confidence in the Fed’s ability to contain inflation without choking off growth.
Today’s session will therefore be informative. It will reveal whether the recent upward trend in long-term rates has more room to run and how investors are pricing the interaction between fiscal choices, monetary policy and nominee credibility. Keep an eye on Treasury moves, earnings sensitivity in rate-exposed sectors and any new guidance on policy tools that affect the supply of safe assets.
Disclaimer: This report is informational only. It does not offer investment advice or predictions. It summarizes market developments and data that market participants are currently watching.
