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Bond Traders on Collision Course With Fed Over Longer-Term View

  • Rate cuts priced in by markets aren’t in central bank forecast
  • July inflation readings next week could force the issue
The Marriner S. Eccles Federal Reserve building in Washington, D.C.

The Marriner S. Eccles Federal Reserve building in Washington, D.C.

Photographer: Al Drago/Bloomberg

The wild ride that bond traders have been on is far from over as market expectations for the longer-term path of Federal Reserve monetary policy appear at odds with the central bank’s own view.

Short-dated Treasury yields have alternately plunged and surged in the past few weeks as investors have tried to determine just how much the Fed will ultimately lift its benchmark and whether it might be forced to follow its tightening with a pullback if the economy starts to crater.