Wash Holds Rates Steady, Triggering U.S. Bond Sell-Off; Market Tightening Effect Exceeds 25 Basis Points Rate Hike

Federal Reserve Chairman Kevin Walsh decided to keep interest rates unchanged last week, leading to significant volatility in the bond market. Senior bond fund manager Eric Hickman stated that the Fed's decision has resulted in a stronger financial tightening effect through market reactions than an actual rate hike would have. As of last Friday's close, the market value of U.S. Treasury bonds, notes, and bills of various maturities had shrunk by approximately $115 billion. Hickman estimated that if the Fed had chosen to raise rates by 25 basis points that week, the bond market would have incurred a loss of about $65 billion, which is less than the losses caused by the actual market fluctuations. Last Friday, the yield on the 30-year U.S. Treasury bond rose to 5.229%, the highest level in nearly 19 years; the yield on the 10-year Treasury bond climbed to 4.688%, the highest level since January 2025. There are divisions within the Fed on this issue, with St. Louis Fed President Musalem stating that the responsibility for monetary policy lies with the FOMC, not the financial markets, suggesting concerns about relying on market adjustments to achieve policy effects.