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Why can bond yields rise after a rate cut?

Longer-term bond yields can rise after a central-bank rate cut if investors conclude that future inflation, growth, government borrowing or the eventual policy path will be stronger than previously expected.

SHORT ANSWER

The core idea

Longer-term bond yields can rise after a central-bank rate cut if investors conclude that future inflation, growth, government borrowing or the eventual policy path will be stronger than previously expected.

THE MECHANISM

What is happening underneath

A policy rate controls the very short end directly, but a ten-year yield reflects expectations over many future years plus term premium. A cut that reduces recession risk can therefore push long yields upward.

MARKET INTERPRETATION

How investors should read it

This is why the direction of the policy rate and the direction of the entire yield curve do not have to match.

BONDSTATS TAKEAWAY

The same market move can carry different information depending on which maturity, issuer and risk premium is changing. Read the question together with the underlying concepts rather than treating one price move as a universal signal.

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