The goal of these posts is to give you the same context and preparation I use each week, while explaining it in a way that does not require you to already know how every corner of the market works. There will also be shorter daily write-ups for those who are not around during the regular trading session. Here is a preview of what we will cover.
Let’s begin. Today is FOMC. I do not think there is any point in trying to forecast what the Fed will do. We know how the market will likely respond, and that is with range and volatility. In simple terms, we already know the Fed can move the market. We do not need to spend the day pretending we know exactly what they will say or exactly how stocks will react when they say it. If you get emotionally invested in the headline, size down. If you are uncomfortable with the position you are carrying into a major catalyst, you will trade like an idiot. You will cut what you should hold, hold what you should cut, chase what you should wait for, and eventually do the opposite of what you already know is right. Price action is still the key.
The first thing I am watching is bonds. Bonds are down and yields are up. Those two things move opposite each other. When investors sell Treasury bonds, bond prices fall and yields rise. That matters because Treasury yields sit underneath a huge part of the financial system. They influence borrowing costs, mortgages, corporate financing, and the rate investors use when they decide what future earnings are worth today. So when yields rise, the pressure does not stay inside the bond market. It eventually shows up somewhere else.
I have discussed this exact relationship before, including in my Kevin Warsh video. Speaking of Fed Chairs that the market hates, Warsh already said at Jackson Hole that the recent inflation prints “do not tell me that underlying trends have meaningfully improved,” that roughly half of the PCE basket is still running above 3%, and that “otherwise we have work to do.” For those who do not trade bonds, TLT tracks long-term Treasuries and generally benefits when long-term bond prices rise and yields fall. So simply hearing “Fed decision” or even “rate cut” does not automatically mean buy TLT. If the market hears Warsh as still worried about inflation, it can keep selling long-term bonds and pushing those yields higher anyway. Nothing in those comments tells me he is preparing to give long-duration bonds an easy ride.
The Treasury side matters too. Bessent has been trying to put a lid on the long end with larger Treasury buybacks, but Treasury still has to sell a tremendous amount of debt. Think about it like any other market. If there is a lot of supply and not enough demand at the current price, the seller has to offer a better deal. In bonds, that means lower prices and higher yields. The market does not care that bonds already look cheap. If large funds and systematic strategies still need to cut exposure, they would keep selling even if the move looks overextended.
This is also why the size of these buybacks needs context. Treasury recently increased one of its long-dated buybacks to as much as $6 billion. Six billion dollars sounds enormous until you compare it with the size of the Treasury market and the amount of new debt the government continues to issue. Around the same time Treasury announced that $6 billion operation, it sold $39 billion of new 10-year notes. Treasury itself says these buybacks primarily support liquidity in older securities, and that distinction matters. A buyback can create some demand in one part of the market, but it does not make the much larger supply problem disappear.
This creates a very simple incentive for large investors. If institutions know Treasury has a huge amount of debt coming to market, why rush to buy an older bond today if they think they can buy similar debt later at a lower price and a higher yield? They can wait. If enough buyers think that way at the same time, Treasury has to keep offering more attractive yields to bring demand back. That is part of the battle happening in the bond market right now. The government needs buyers, while the buyers know the government needs them.
This is why a $6 billion buyback can sound powerful without actually changing the larger picture. The Treasury market has roughly $32 trillion of debt held by the public, while total federal debt recently moved above $40 trillion. In that context, a few billion dollars can help liquidity without overwhelming the underlying supply. We have already seen that play out. Treasury increased the long-end buybacks, and long-term yields continued moving higher anyway. As of this morning, the 10-year moved above 5%, while the 30-year moved above 5.3%.
And this is where the bond story becomes much bigger than bonds. The 10-year Treasury yield is one of the most important benchmark rates in the world. The U.S. government sits at the base of the financial system, so markets use Treasury yields as a starting point when they price mortgages, corporate debt, other bonds, and financial assets more broadly. If the return you can earn from lending money to the U.S. government suddenly moves higher, everything else has to compete with that return.
That competition matters for stocks. Imagine that investors could only earn 2% or 3% without taking much risk. In that world, taking more risk to own stocks makes more sense. Now move the 10-year above 5%. Suddenly an investor can earn around 5% in a Treasury security backed by the U.S. government. Stocks can still go higher, but now they have to offer investors a good enough reason to take the additional risk. This is one reason high yields can put pressure on equity valuations without a single company doing anything wrong.
It also hits the government itself. The United States does not borrow $40 trillion once and leave the interest rate locked forever. Old debt constantly matures, and Treasury has to refinance it with new debt. When older low-rate debt rolls into new debt at much higher rates, the government's interest bill grows. The CBO already expects net federal interest costs to reach roughly $1 trillion this year. The higher yields stay, the more money the government eventually has to devote to servicing debt instead of everything else, and the more pressure Treasury faces to keep issuing debt to fund the government. That does not mean the United States suddenly defaults because the 10-year crossed 5%. It means the math gets progressively less comfortable the longer borrowing costs remain high.
Higher yields can also expose problems inside the financial system. Remember the basic rule from earlier: when yields rise, existing bond prices fall. Banks, insurers, pension funds, and other institutions own enormous portfolios of fixed-rate securities. If they bought those securities when yields were much lower, the market value of those holdings falls as newer bonds start offering better rates. Normally, an institution can simply hold the bond until maturity and collect what it is owed. The problem begins when it suddenly needs cash and has to sell those bonds at a loss.
We already saw a version of this with Silicon Valley Bank in 2023. Rising rates had created large unrealized losses in its securities portfolio, and when the bank needed liquidity, selling securities at a substantial loss helped destroy confidence and accelerate the run. SVB had other major problems, including its reliance on uninsured deposits, so the comparison should not be stretched into “every bank is about to fail.” The point is simpler: rapid moves in long-term rates can expose balance-sheet problems that were much easier to hide when yields were low.
Then the pressure reaches the real economy. Mortgage rates track the 10-year Treasury closely, although they also include an additional spread for mortgage-specific risks and costs. Corporate borrowing works in a similar way. Companies generally borrow at a rate above Treasuries because investors need compensation for taking more risk. So when the Treasury benchmark moves higher, businesses and households usually pay more too. That can slow home purchases, refinancing, business investment, hiring, expansion, and eventually economic growth.
This is why I keep emphasizing the 10-year and 30-year yields. Most people hear “Fed” and immediately think about the overnight interest rate, but the Fed does not control every rate in the market. The market has much more influence over longer-term yields. So even if traders already price in a rate hike at 90%, financial conditions can still tighten because the 10-year or 30-year keeps moving higher.
There is another important distinction here. A high short-term rate usually tells you a lot about what the Federal Reserve is doing. A rapidly rising long-term rate tells you more about what investors themselves demand to hold debt for the next 10, 20, or 30 years. Inflation expectations matter. Growth matters. Government borrowing matters. The amount of debt coming to market matters. The return investors can earn elsewhere matters. When all of those things push long-term yields higher at once, the market can tighten financial conditions without waiting for the Fed.
That is why it is important to understand the narrative surrounding buybacks. Treasury can step in and buy some older long-dated bonds, which creates demand and helps those parts of the market trade more smoothly. What it cannot do with a relatively small buyback is erase the enormous amount of debt Treasury still needs to finance. The market understood that distinction very quickly. Investors did not suddenly start buying everything because Treasury announced a larger program. Yields continued higher.
That does not mean buyers disappear forever. At some point, higher yields themselves create demand because the return becomes attractive enough. We saw evidence of that in the recent $39 billion 10-year auction, which drew very strong demand. This is important because the story is not simply “nobody wants Treasuries.” The story is that buyers increasingly care about the price. If they believe more supply is coming or inflation will stay high, they can demand a higher yield before they step in.
That is especially important right now because investors already own fewer bonds than normal. BofA’s survey has fund managers at their most underweight bonds since May 2022, while short Treasuries ranks as the second-most crowded trade behind long semiconductors. That does not mean bonds suddenly have to reverse. Crowded trades can stay crowded for a long time. It simply means a lot of people already sit on the same side of the boat, and if something forces them to move the other way, the reversal can happen quickly.
Why should the stock market care? That’s easy. Higher long-term yields make borrowing more expensive. They also give investors more alternatives. If you can earn an attractive return in Treasuries, you do not have to take as much risk in stocks. Higher yields also hurt companies that depend heavily on future growth because investors discount those future earnings more aggressively. This is one reason technology and other long-duration assets tend to pay so much attention to the bond market.
For us as day traders, the translation is much simpler. If yields are moving, the Fed is approaching, and traders are already nervous about inflation and policy, expect wider ranges, faster fakeouts, and higher implied volatility. That does not mean every move will become clean. In fact, it usually means the opposite. The market can move violently in one direction, reverse, and then move again once traders finish digesting the headline.
Do not sit around complaining about a choppy Fed day. You already know the meeting is coming. Plot the range. Utilize the Rangefinder Rails. Know the important levels before the headline hits. Stop shorting into the hole because something already fell a lot, and stop getting in the way of a strong move because you decided it “has to” reverse.
Let other people go first. Let them chase the first headline, the first spike, and the first candle. You can wait for the rejection or the retest at the levels we identify beforehand. That is the entire point of preparation. You are not trying to predict every tick. You are trying to know where you want to pay attention if price gets there.
This is where newer traders usually make the mistake. They think the edge comes from knowing what the Fed will do before everyone else. It does not. Even if you correctly guess the decision, the market can still react in the opposite direction because traders expected something different in the press conference, because yields move, because the dollar moves, or because the decision was already priced in. Markets are never that predictable, or everyone would be rich. The edge is having a repeatable process when the outcome is uncertain.
Remember, this Fed meeting also comes seven weeks before the midterm elections. Affordability and the economy remain major concerns for Americans, which makes the political backdrop around rates even more complicated. The Fed still has a job to do. Raise rates and you put more pressure on borrowers and the economy. Stay too loose and inflation can remain stubborn. Meanwhile, if long-term yields keep rising on their own, financial conditions can tighten even without the Fed doing much at all.
That is why I do not think the useful question this week is whether a hike is “bullish” or “bearish.” I care more about what happens after the decision. What happens to the 10-year and 30-year yields? Does the dollar confirm the move? Does the first stock-market reaction hold, or does it reverse? Where does price reject? Where does it retest? Does implied volatility collapse after the event, or does the market continue pricing in uncertainty?
Those are the things we can actually use.
With pressure coming from several directions, Warsh and company do not have an easy path forward. I think that creates a much stronger case for increased volatility and a wider trading range than it does for confidently predicting direction. For a day trader, a wider range is not a bad thing. It creates opportunity. The problem starts when you trade that range without patience, preparation, or discipline.
That is the broader goal of these weekly plans. I want you to understand the story the market is telling before the session begins, know which pieces actually matter, and then use that information to make better decisions when price reaches the levels we care about. You do not need to become an economist. You just need enough context to understand why the market may behave differently this week than it did last week.