- Treasury Secretary Scott Bessent noted the two-year Treasury yield at 3.75% is below the Fed’s 4.25%–4.5% policy rate, signaling market expectations for rate cuts, likely starting in June.
- President Trump has criticized the Federal Reserve and Jerome Powell, claiming superior knowledge of interest rates while denying plans to fire Powell, creating uncertainty.
- The 10-year Treasury yield, at 4.15% Thursday, has declined since January 20 but remains volatile between 4%–4.5% due to tariff policy shifts, a key focus for Bessent and Trump.
Treasury Secretary Scott Bessent emphasized on Thursday that the bond market is sending a clear message to the Federal Reserve, pointing to the two-year Treasury yield of 3.75% falling below the Fed’s policy rate range of 4.25% to 4.5% as evidence that rate cuts are warranted. Speaking on Fox Business Network’s “Mornings with Maria,” Bessent highlighted this gap as a signal that investors expect the Fed to lower its benchmark interest rate, which influences borrowing costs across various bond maturities, from short-term three-month notes to the longer-term 10-year Treasury. Despite market anticipation for a potential rate cut in June, with further reductions expected later in 2025, traders do not foresee immediate action at the Fed’s upcoming May 6-7 meeting.
President Donald Trump has intensified pressure on the Federal Reserve and its chairman, Jerome Powell, echoing Bessent’s call for lower interest rates while maintaining a critical stance toward the central bank. At a Michigan rally, Trump described the Fed’s leadership as underperforming, asserting his superior understanding of interest rates without directly naming Powell. This follows a turbulent period where Trump’s comments have oscillated, from reassuring investors last week that he had “no intention” of firing Powell to reigniting speculation about the chairman’s tenure by previously stating on social media that “Powell’s termination cannot come fast enough.” These remarks have kept financial markets on edge, given the Fed’s critical role in maintaining economic stability through independent monetary policy decisions.
Bessent also underscored the administration’s focus on managing the 10-year Treasury yield, which stood at 4.15% on Thursday, noting a significant decline since the start of the year, particularly since January 20. The 10-year yield, a key indicator of investor confidence and borrowing costs, has fluctuated between 4% and 4.5% over the past month, driven by the uncertainty surrounding President Trump’s trade policies. The administration’s announcement of the steepest tariffs in a century, followed by a pause, prompted businesses to rush imports, contributing to yield volatility. Bessent reiterated that he and Trump are prioritizing stabilization of this yield, which affects everything from mortgage rates to corporate borrowing, as part of their broader economic strategy. The interplay of tariff policies, market signals, and Trump’s public critiques of the Fed continues to shape expectations for monetary policy and economic outcomes in the near term.
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