Fed decision to rattle markets either way, a hold may be the riskier path: deVere CEO
The Federal Reserve faces a decision that could rattle markets either way, and a hold may be the riskier path, warns the CEO of deVere Group, one of the world’s largest independent financial advisory organisations, as bond markets price in a probability above 90% and Treasury yields hit levels unseen in almost two decades.
The comments from Nigel Green come as the 10-year Treasury yield pushes past 5%, its highest since 2007, the two-year note trades near its highest since 2024, and the 30-year fixed mortgage rate crosses 7% for the first time this cycle.
Swaps markets are pricing further tightening before year end, on top of today’s expected move, which would be the Fed’s first rate increase since 2023. A sharp rise in oil prices and a hotter than expected inflation report last week have hardened the case for action.
Nigel Green says the outcome that would unsettle markets most today may not be the one everyone is braced for.
He says: “There’s a real chance markets move more if the Fed holds than if it hikes. A 90% probability is priced in for a reason, and a hold at this point reads as hesitation rather than restraint, at exactly the moment investors want to see the problem being dealt with.”
He adds that a pause now would not make the underlying inflation pressure disappear.
He says: “A hold today wouldn’t remove what’s building underneath this market. It would only push the moment of reckoning further out, and delay tends to make the eventual response more aggressive, not less.”
He says: “Either way, expect a wobble. Every part of this market is on edge heading into today, and investors should be positioning for volatility around this decision rather than betting on a single clean outcome.”
He says: “Today’s move doesn’t settle anything. Investors waiting for relief once the Fed acts are going to be disappointed, because every part of this market is still pricing in more tightening ahead regardless of what happens today.”
Nigel Green says the speed of the repricing across the curve matters as much as the level it has reached.
He says: “Mortgage borrowers just watched their rate cross 7% in a matter of days, a rapid repricing rather than a slow drift. Anyone renewing a mortgage, refinancing a business loan or reviewing a pension in the coming months is walking into a completely different cost of money than the one they planned around.”
He adds that pension funds and long-duration portfolios face a comparable reckoning.
He says: “Every actuarial assumption, every discount rate and every retirement projection built during the cheap money years needs revisiting right now. A move this size at the long end of the curve changes what people can safely assume their savings will earn and what their future liabilities will cost.”
Nigel Green says corporate borrowers are equally exposed, with financing costs resetting well beyond today’s meeting.
He says: “Companies rolling over debt in the next two quarters will refinance at levels nobody budgeted for at the start of the year. The pressure reaches investment plans, hiring and dividends, and it doesn’t pause for the Fed to explain itself.”
He points to the pace of positioning already built into the bond market, with traders adding short bets at the fastest rate in more than a year, as evidence that investors expect the move to extend well past today.
He says: “When the market builds positioning this aggressively ahead of a decision already priced at over 90%, it shows investors don’t expect relief today.
“People need to plan for months of elevated borrowing costs, and treat a single Fed meeting as one step in a longer process rather than an ending.”
Nigel Green urges savers, borrowers and investors to use the coming weeks to review exposure rather than wait for a signal that conditions have eased.
He concludes: “Waiting for a press conference to say it’s safe to relax is not a strategy, and on the evidence in this market, that signal isn’t coming any time soon.”