Bond Market Breakdown: Is Fed Intervention Now Inevitable?

Fed Under Pressure as Market Carnage Fuels Calls for Emergency Rate Cuts

Markets are unraveling at breakneck speed, and traders are increasingly betting the Federal Reserve will be forced to step in — not later, but now.

Bitcoin tumbled to $75,800, down 8% on the day, while U.S. equities teetered on the edge of panic, with S&P 500 futures down another 5% Monday morning, extending a brutal three-day collapse nearing 15%. The sell-off has turned what began as a tariff-induced pullback into a full-blown credit market alarm.

Fed funds futures now price in up to five rate cuts in 2025 as bets rise that policymakers will be compelled to act aggressively. Traders assign a 61% chance the Fed will cut rates by 25 basis points at its May 7 meeting, according to the CME FedWatch Tool — with expectations for the benchmark rate to drop to as low as 3.00%–3.25% by year’s end.

This panic is serving a hidden purpose: plummeting Treasury yields. The 10-year yield has nosedived to 3.923%, easing pressure on the U.S. government to refinance massive amounts of short-term debt — a strategy inherited from former Treasury Secretary Janet Yellen, who pivoted away from longer maturities in favor of Treasury bills.

While this shift temporarily boosted liquidity, it created a ticking clock of rolling short-term obligations with rates near 5%. Now, with trillions in debt coming due, the urgency for lower borrowing costs is real — and the market is doing the Fed’s job for it.

For the Trump administration, this environment may offer a strategic edge. But for investors, the message is clear: the Fed’s hand is being forced not by inflation, but by a market threatening to spin out of control.

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