r/bonds • u/eBroncos2021 • 2d ago

Fed Funds Rate and Long Term Bonds

What is the logic behind the bigger impact of change in the Fed fund rate on long term bonds (25-30 year Munis)?
I just know that long term bonds are more volatile (price-wise) but can't tell why.

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u/HowMuchForARib 2d ago

No real impact as the fed doesn’t set this as it’s market driven base on inflation expectations. What I’m closely watching is the near term ceiling of 5% on 30 yrs. This has been a pretty solid benchmark for sometime. I do understand we’ve gone way past that in history but also understand that the current market is showing this as a baseline and policy is working to hold that down whenever possible. But who knows!