---
title: "US Treasury bonds plummet like in 1995, traders believe in a soft landing"
type: "News"
locale: "zh-HK"
url: "https://longbridge.com/zh-HK/news/217571158.md"
description: "US Treasury bonds experienced a significant sell-off due to the Fed's rate cut, with yields rising by 34 basis points, similar to the situation in 1995. A strategist from Deutsche Bank mentioned that the rise in yields reflects a reduced risk of economic recession. The market expects the Fed to cut rates by 128 basis points in 2025, a decrease from 195 basis points a month ago. The 10-year US Treasury yield rose from 3.6% to 4.2%, with market sentiment still bearish"
datetime: "2024-10-22T23:25:25.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/217571158.md)
  - [en](https://longbridge.com/en/news/217571158.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/217571158.md)
---

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# US Treasury bonds plummet like in 1995, traders believe in a soft landing

The last time US government bonds experienced such a significant sell-off due to the Federal Reserve starting to cut interest rates, Alan Greenspan was planning a rare soft landing.

Since the Fed's first rate cut on September 18, 2020, the two-year Treasury yield has risen by 34 basis points. In 1995, under Greenspan's leadership, the Fed successfully cooled the economy without causing a recession, and a similar rise in yields occurred at that time. In previous rate-cut cycles before 1989, the two-year Treasury yield typically fell by an average of 15 basis points one month after the Fed started cutting rates.

The recent sell-off in US Treasuries is similar to the situation after the Fed's rate cut in 1995.

Steven Zeng, interest rate strategist at Deutsche Bank, said that **the rise in yields "reflects a reduced likelihood of economic recession risk."** "The data is quite strong. **The Fed may slow down the pace of rate cuts**."

The latest rebound in yields indicates that the resilience of the US economy and the prosperity of financial markets have limited Fed Chairman Powell's active rate-cutting choices. Rate swap trading shows that traders expect the Fed to cut rates by 128 basis points by September 2025, compared to 195 basis points a month ago.

As investors weigh the possibility of a slowdown in rate cuts, global bond yields continued to decline this week, leading to a total return on US Treasuries measured by an index rising by only 1.7% as of this Monday, lagging behind the 4.3% increase over the same period. The recent rise has pushed the yield on the 10-year benchmark Treasury from a 15-month low of 3.6% on September 17 to around 4.2%, the day before the Fed announced a 50 basis point rate cut on September 17.

Tuesday's trading activity indicated that **market sentiment remains bearish**, with a series of large sell trades in 10-year Treasury futures. In the options market, there was a trade targeting a rise to around 4.75% in the yield on 10-year Treasuries by the expiration of the November 22 options.

In 1995, after a significant increase in interest rates, the Fed cut rates three times within six months—from 6% to 5.25%. After the first rate cut that year, the yield on the 10-year Treasury rose by over 100 basis points after 12 months, while the two-year Treasury yield rose by 90 basis points.

This time, **the rise in yields also reflects growing concerns that the Republican Party may control the White House and Congress in the November 5 election, potentially increasing the federal deficit and inflation.** Volatility has also increased. The ICE BofA Move Index, which tracks the expected volatility of US Treasury bonds in the next month, has risen to its highest level this year

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