Fed's Rate Cut Dilemma: Market Braces for Potential Shock

The Federal Reserve’s upcoming interest rate decision has bond investors on edge, with the market divided over the size of the expected cut. Treasuries have seen a five-month rally, driving yields to two-year lows. However, this optimism could lead to significant losses if the Fed chooses a smaller 25-basis-point reduction instead of the larger cut some are hoping for. The decision is highly anticipated, as it will set the tone for the Fed’s rate-cutting cycle in an uncertain economic environment.