US Treasury Yields Rise After Fed Cuts Rates Amid Inflation Concerns

US Treasury yields, particularly the 10-year, have risen following the Federal Reserve's 25 basis point rate cut and unexpectedly strong economic data, including lower jobless claims and robust manufacturing activity. This has pushed yields back to levels deemed fair value by analysts and widened the spread between two- and ten-year Treasuries to its highest since September, signaling recalibrated expectations for future borrowing costs. The US dollar has strengthened in response, supported by higher Treasury yields and positive economic indicators, despite some concerns about Federal Reserve independence due to President Trump's attempts to influence Fed governance. Minneapolis Fed President Neel Kashkari noted a weakening labor market and moderate wage growth but cautioned against preset rate cut paths, reflecting the Fed's delicate balance between controlling inflation and supporting growth. Meanwhile, the euro has weakened due to deflation fears, a stronger dollar, and increased German government borrowing to fund infrastructure and defense spending. Overall, markets are adjusting to a scenario of slower, steadier monetary easing amid resilient US economic fundamentals and geopolitical fiscal challenges in Europe.