When Will Interest Rates Drop?

Summary

Benjamin Cowen argues that U.S. Treasury yields may be near a short-term peak, though they could rise further before turning down. He expects uncertainty about peak rates to persist until around the late-October FOMC meeting or early November, with yields potentially declining from around mid-November. This is a forecast, not a certainty.

The rise in the 10-year yield reflects concern that the Federal Reserve may be slow to respond to inflation and market conditions. Cowen notes that the market-implied probability of an October rate hike fell sharply. A subsequent decline in two-year Treasury yields could reduce pressure on the Fed to raise rates further. He also expects long-term rates could trend higher over the next 10–20 years, even if they decline in the near term.

Key Figures and Context

• 10-year Treasury yield: Reached 5.3%, above Cowen’s 5% benchmark. He says yields could still reach 5.4%–5.6%.
• October rate-hike probability: Reportedly fell from 64% to 17.7% in about a week.
• Timing forecast: A local peak could occur before early November. Cowen expects yields may start falling around mid-November, after the midterm elections.
• Historical comparisons: Cowen compares current yield patterns with 2018 and 2022, when yields peaked around October or November and then weakened into year-end. He notes that inflation was a larger driver of the 2022 increase.
• Next FOMC meeting: Described as occurring on October 28.

Framework and Reasoning

Cowen’s analysis focuses on comparing current Treasury-yield movements with those in previous midterm-election years, particularly 2018 and 2022. He suggests watching the 10-year yield for a possible local peak around the late-October FOMC meeting or in early November, while tracking two-year yields as an indicator of market expectations for Fed policy.

He also recommends considering inflation data, PCE, and labor-market conditions. Cowen says the increase in unemployment was mainly due to higher labor-force participation rather than layoffs. If two-year yields decline after a period of market concern, the Fed may have less need to raise rates further.

Assets and Instruments Mentioned

• 10-year and two-year U.S. Treasury yields
• Federal Reserve policy rates and FOMC decisions
• Risk assets, discussed broadly; no specific assets are named

Cautions and Disclosures

Cowen emphasizes that his timing estimate is not an exact science. A poor inflation report or a Fed decision not to raise rates could trigger renewed market concern, and yields could move higher before declining.

The channel description states that the content is not financial advice.

Presenter/source: Benjamin Cowen, Into the Cryptoverse.