Benjamin Cowen breaks down why the Fed holding rates at 3.75% just triggered a bond market revolt, and why September looks like the most likely month for a hike.
Key Points
Key Highlights:
- The 30 year yield finally broke through 5.2%, a level it had been rejected at since October 2023, right after the Fed refused to hike
- The 2 year yield, a good proxy for the neutral rate, overtook the Fed funds rate back in March, meaning policy is actually more accommodative than it looks even though rates never changed
- Initial jobless claims just hit their lowest level in decades, showing the labor market isn't cooling the way people assume, which raises the risk of inflation creeping back
- History shows the Fed always eventually follows the 2 year yield higher, and a similar setup preceded stock corrections in 2014, 2018, 2022, and 2023
Takeaway A rate hike is likely coming this year, most probably in September or October, and that lines up with the same seasonal pattern that has dragged stocks down 10 to 20% in every recent midterm year, potentially setting up Bitcoin's real bottom in Q4.
