With a nearly 100% chance the Fed will hold rates steady this week, the bond market is struggling under the weight of rising yields and poor technical indicators.
Despite clear signs of economic cooling, the Fed is widely expected to hold rates steady at the May 7 meeting, with Fed Funds Futures pricing in a 100% chance of no change.
This policy inertia is weighing heavily on bonds, which continue to sell off as yields climb and technical pressure builds.
The Stipelis Bond Indicator has dropped 2.72 points from its recent high and is now up just 1.19% year to date. It’s posted three straight days of losses and now sits below its daily, weekly, and monthly pivot levels — signaling further downside risk.
The 10-year yield has surged over 30 basis points since the April lows, pressuring equities and confirming what our indicator has been flashing: weakness.
From a trend perspective, our bond signal continues to move opposite interest rates — a dynamic that remains firmly intact.
The macro backdrop offers little support. Q1 GDP contracted 0.3%, jobless claims are creeping up, and global data continues to lag. Still, the Fed remains sidelined — with no indication of a cut in sight.
From a sentiment standpoint, fixed income traders appear frustrated and exhausted.
Hopes for easing have given way to a holding pattern that may extend into the summer. Without a shift from the Fed or a surprise macro shock, rallies in Treasuries may remain fleeting.
At Stipelis, we remain cautious. Momentum is not on the bond bulls’ side — at least not yet.
Stephen Coleman Head market strategist at Stipelis 5-5-2025