The FOMC Minutes Drop Today. The Bond Market Already Voted.

The Fed held rates steady last week. Today at 2 p.m. Eastern, the FOMC minutes from that meeting go public, and investors will be combing every word for clues about what comes next. The twist: the bond market has already handed down its own verdict, and it does not line up neatly with the Fed’s holding pattern.

Here is what moved overnight. The S&P 500 dropped 53 points to 7,691, the Nasdaq fell 1.33%, and gold climbed to $4,415, up $49. The dollar slipped to 99.39. Meanwhile, the 10-year Treasury yield sits at 4.72%, a full 53 basis points above the 2-year at 4.19%. That is the yield curve telling you that markets expect rates to stay higher for longer, even as the Fed stands pat at 3.5% to 3.75%.

The tension worth watching: breakeven inflation (what the bond market expects inflation to average over 10 years) sits at 2.3%, which is close to the Fed’s 2% target. So inflation expectations look anchored. But the 10-year yield at 4.72% says the bond market wants more compensation than that spread alone explains. That gap is the conversation in today’s minutes.

On deck today: FOMC minutes at 2 p.m. Eastern. Existing home sales data also prints this morning.

Why it matters: Long-term rates above 4.7% raise the cost of everything from mortgages to corporate borrowing. When long rates rise faster than the Fed moves, the economy tightens on its own, with or without another Fed hike.

The deeper read on where rates go from here, and what past cycles at this yield spread have looked like, lands Sunday in The Long View. Free to subscribe.

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