The Yield Curve Before & After the Rate Cut: Why Have Longer-Term Yields Risen since the Rate Cut? Already Priced in? Inflation Concerns as Policy Loosens in a Decent Economy?

Mortgage rates also ticked up.

By Wolf Richter for WOLF STREET.

The Treasury yield curve is un-inverting piece by piece, but not in the way future homebuyers want: before and since the rate cut, shorter-term Treasury yields have fallen, driven by the Fed’s actual and expected rate cuts; but longer-term Treasury yields and mortgage rates have inched up.

As shorter-term yields drop while longer-term yields rise – or fall more slowly than shorter-term yields – the yield curve un-inverts step by step and eventually enters its normal state where all shorter-term yields are lower than longer-term yields.

But it still has a long way to go before it’s un-inverted all the way, to where shorter-term yields are lower than longer-term yields across the yield curve.

What we have now is a yield curve with still high but falling shorter-term yields, a sag in the middle with the low point at 3 years, and rising longer-term yields.