The Fed’s rate lever is breaking as bond markets stop following its lead
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For decades, the Fed stabilized the economy with one simple tool: interest rates.
Key facts
Federal debt reached $37.6 trillion as of September 2025, with annual interest payments hitting $1.2 trillion in fiscal year 2025 alone, and the Congressional Budget Office projects deficits above $2
When the Fed trimmed 100 basis points across three cuts at the end of 2024, the 10-year yield barely moved
Treasury issued $30.2 trillion in marketable securities across fiscal year 2025 to refinance maturing debt and fund new borrowing
The 30-year fixed rate briefly 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 in an easing cycle
Summary
01 The Fed cut rates, but 10-year Treasury yields barely moved, showing bond markets no longer follow its lead. 02 That decoupling keeps mortgage costs high and raises refinancing pressure on $9.1 trillion in maturing debt. 03 With the Fed restarting Treasury bill purchases, markets are asking whether today’s liquidity support is routine or a warning. Today, the Fed can cut rates while long-term borrowing costs stay elevated, mortgage rates remain high, and bond markets react as if the central bank is losing control of the financial system's most important lever.