Fed Chair Jerome Powell communicated that the reduction in the Fed Funds rate was not going to be a series of reductions, but rather a wait and see approach contingent on economic progress over the next few months.
The Fed’s reduction to the Fed Funds rate was the first since 2008 when the financial crisis had begun. The Fed Funds rate was essential zero from the end of 2008 to the beginning of 2016 when the Fed started raising the target rate again.
The 10-year Treasury yield dropped in July to its lowest level since 2016 as markets assessed the Fed Chairman’s comments surrounding any possible rate cuts over the next few months. The Fed Funds futures market is pricing in a near certain possibility of another rate reduction in September 2019.
Negative interest rates outside the U.S., combined with expectations of weaker economic growth and minimal inflation, have weighed on long-term Treasury bond yields.
Sources: Federal Reserve, U.S. Treasury