Why the tax bill is more 'consequential' than the Fed decision
The Federal Reserve is expected to stay in wait-and-see mode, with no major policy shift on deck.
Brian Rehling, Wells Fargo head of global fixed income strategy, joins Morning Brief to explain what a neutral stance would mean for yields (^TYX, ^TNX, ^FVX) and portfolios, and how President Trump's "big, beautiful bill" will be more impactful to investors than today's Fed decision.
Tune into Yahoo Finance's live coverage of the Fed decision at 2 p.m. and Fed Chair Jerome Powell's press conference at 2:30 p.m.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
what do you expect the tenor to be from Fed Chair Powell today?
Well, I really expect uh the tenor to be rather neutral. I I don't think the Fed is going to make a big push here uh either way. They're really in wait and see mode. Um so I'm not expecting uh any surprises.
So what does a neutral tenor mean for fixed income strategy as it pertains to people's portfolios?
Well, you know, for the time being uh the 10-year yields are really kind of trading in a fairly tight range around that 240 level. Uh I don't see any big change to that. A couple things I would watch for though uh as the big beautiful bill makes its way through Washington, uh the amount of stimulus uh that could potentially push the longer term rates a little higher. That's maybe a little bit more consequential uh than what the Fed is doing today, which is uh again largely expected to be um you know, a neutral or more non-event. Um so those are the kind of things I'd be watching. Also kind of risk on, risk off in the markets. We still have that negative correlation between stocks and bonds uh that can push yields around.
And so with that in mind, what are you seeing in terms of the appetite for duration right now among investors and after we've moved through the auctions that took place last week?
Yeah, I you know, I think largely, you know, there's not a lot of investors going out there adding a lot of duration, especially at these levels. Uh the 10-year again, down below that 440 level, doesn't make a whole lot of sense unless you think the economy is going to really slow more dramatically, uh then you would of course think about adding duration. To me, there's just too many risks out there uh both with uh fiscal stimulus making its way through Washington and uh also with kind of the tariff uncertainty and how inflation might uh manifest itself later this year. I just don't think it's a good time to get um stuck long duration.
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