Bond Investors Scale Back Long-Term Treasuries Ahead of Fed Rate Cut

U.S. bond investors are reducing their holdings in longer-dated Treasuries as the Federal Reserve prepares to cut interest rates. Reuters

Typically, investors buy longer-term bonds when the Fed eases rates. Instead, many are trimming those bets now, believing the economy may land softly without a deep downturn. Reuters

The Fed’s policy-setting body, the Federal Open Market Committee, is expected to lower the benchmark interest rate by 0.25 percentage points to a range of 3.75-4.00 %. Reuters

Investors are also watching Fed Chair Jerome Powell for clues about the possible end of the Fed’s balance-sheet reduction program, known as quantitative tightening (QT). Reuters

QT’s return would cut Treasury supply, which could help bond prices and push down yields. But many investors say valuation levels are no longer as attractive as they were a few months ago. Reuters

Some fund managers still hold moderate positions in intermediate-term debt (for example, five-year maturities). Yet overall sentiment is cautious, with a shift toward shorter maturities until the path of economic growth and inflation becomes clearer. Reuters

In short, even though a rate cut usually supports longer-bond markets, this time investors are holding back — signaling they don’t expect a deep downturn and prefer flexibility.