Fed Does Nothing, Bond Market Copies Its Homework

The Federal Reserve held rates steady. The 10-year Treasury yield crept higher anyway. Two things happened, and neither one was your idea.

Look at that word. Crept. The yield did not surge. It did not spike. It tiptoed upward like a teenager sneaking in past curfew, hoping nobody at the Fed would notice.

Traders were "awaiting" the decision. Awaiting. Grown adults with Bloomberg terminals sat motionless, staring at a statement written by a committee, the way a dog stares at a garage door.

Then the Fed did the one thing everyone expected. Nothing. Rates stayed put. Jerome Powell's institution held a meeting to announce that it had held a meeting.

The yield moved up a hair before the decision, during the decision, and in spite of the decision. That is called price discovery. I call it a ten-year note fidgeting.

Here is what the chart says. The chart says line. A line goes up a little, then down a little, then someone on CNBC draws a circle around it and calls it a "key level." I have drawn that circle. It was a good circle. It meant nothing.

Retail traders will read this headline and conclude they need to buy something. Anything. Maybe TLT. Maybe a leveraged ETF with a ticker that sounds like a sneeze. They will hold it for nine days, sell the bottom, and tell their group chat they were "hedging."

You do not understand the 10-year Treasury. You think it is a stock. It is a loan to the United States government, and the government has never once asked for your opinion on it.

The yield crept higher. The Fed sat on its hands. And somewhere a man with a Robinhood account is explaining duration risk to his dentist, who is trying to leave.

Photo by Markus Spiske on Unsplash