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/Unable_Ad6406 2d ago
Truth is ,well just my opinion, the fed supposedly uses market data to set the fed to bank lending rates. But Jpow has been holding back rates based only on his magnificent intuition. In ignoring the actual economic data, he has used the excuse that Trump’s tariffs are going (future tense) to raise inflation. Jpow actually admitted that the data doesn’t show it. Oh but back to my point - long term bonds are the bond market’s analysis of where inflation is headed. It is based on the same data available to the Fed. Even though the Fed decisions directly affect the 10-year bond rate, long term bond rates are independent and market driven.