Analysis: Investors may not be able to properly assess Fed actions before U.S. presidential election

Since the Federal Reserve's sharp rate cut on September 18, US long-term bond yields, inflation expectations, and the "term premium" (the compensation investors require to buy long-term government bonds instead of rolling over short-term bonds) have risen sharply. Given that former President appears to be regaining momentum in the presidential race, while touting a series of plans that could disrupt the budget, this may reflect investors' concerns about fiscal profligacy and overly dovish monetary policy. Analysts at noted that in the 35 initial rate cuts by the Federal Reserve since 1994, the 10-year Treasury yield has seen the third-largest increase on record, surpassed only by November 2001 and June 2008. Ultimately, investors will not be able to accurately assess the Federal Reserve's actions before the November 5 presidential election.