Macro

BofA’s Cabana: Fed Faces Choice of Hiking Rates or Surging Treasury Yields

Oct 7, 2026 14:53 ET · 1h ago

TREE NEWS reports: Bank of America’s Mark Cabana said the Fed’s options are now “either hike or bond yields spike,” after a global bond selloff pushed investors to reassess the neutral rate. Cabana, BofA Securities’ co-head of global rates strategy, said Fed Chair Kevin Warsh’s August Jackson Hole remark that it is “hard to say overall financial conditions are restrictive” loosened the Fed guidance that had capped repricing, and that more than half of the 2026 rise in 10-year Treasury yields came after that speech. He called another Fed hike “extremely unlikely.”

Original source

AI take

Cabana's framing matters because it recasts the Fed's problem as a credibility test rather than a rate-path call: if policy is judged insufficiently restrictive, the adjustment happens in the long end instead. The mechanism he identifies is guidance, not fundamentals — a single Jackson Hole remark is credited with unlocking more than half of the 2026 move in 10-year yields, which implies the term premium is now sensitive to Fed communication itself. For crypto and RWA markets, the transmission runs through the discount rate rather than any direct channel, so the open question is whether the long end stabilizes or keeps doing the tightening the Fed won't.

Generated by AI for reference only.

Pitch us Feedback

Related News