10YR treasury yields have inched higher since the Fed's recent rate cut.

A few weeks ago, we touched on how the S&P 500 behaved after the Fed cut rates within 1% of its all-time high (click here for more). Continued that conversation, many fixed income investors hoped that the Fed cutting rates would be a tailwind for bonds moving forward. However, when the S&P 500 is trading near all-time highs and the Fed cuts rates, the US Treasury 10YR Yield Index (TNX) has moved higher on average over the next six months to one-year. In fact, TNX was lower six months later only twice following the cuts in January 1996 and September 2024. Looking at the averages, TNX is up 21 basis points over the next six months on average and 23 basis points one year later. There have been a handful of times TNX was up roughly a full percent, two of which were following the cuts in 2019 with the other being August 1991.  As of 10/7, TNX is at 4.17%, nine basis points higher than where it was when the Fed cut rates in September.

Looking at the trend chart for TNX, it is now trading in a negative trend for the first time since 2021 and on a sell signal. So, there is some evidence that the path of least resistance for TNX is lower despite what has happened historically following rate cuts with the S&P 500 near all-time highs. Nonetheless, TNX still trades in a well-established range that has been in place since 2024. Until that range is broken, it is difficult to confidently say TNX will trend in either direction. While the recent cut in the Fed Funds Rate has been viewed as a positive for intermediate and long-duration bonds, that has not always been the case especially following rate cuts when the S&P 500 is trading near all-time highs.