The Federal Reserve's whatever-it-takes approach to stave off economic calamity has kept interest rates near zero and helped drive U.S. stocks back to pre-pandemic record levels, while weakening the usual dynamic between safe-haven U.S. Treasuries and riskier equities.
The S&P 500 500 and U.S. 10-year Treasury notes typically move in opposite directions, such that when equities rise during periods of confidence and risk-taking, bond prices fall, pushing yields, which move inversely to prices, higher. "The Fed and the government have pledged ongoing support for the economy, which has pushed risky assets higher," he said."At the same time, the Fed wants to keep rates low in order to keep stimulus in place and to prevent a tightening in financial conditions."
The Fed's policy-setting Federal Open Market Committee meets Tuesday and Wednesday, with no major announcements expected. But it may lay the groundwork for more action in September or in the fourth quarter, analysts said.