What do Fed rate cuts mean for the bond market?
As speculation builds that the Federal Reserve might resume rate cuts, bond investors especially should be aware of the ripple effects.
MARKET SENTIMENT APPEARS TO BE shifting from “Will they?” to “When will they?” on the question of the Federal Reserve’s next move on interest rates. Heading into the Fed’s September meeting, expectations have grown around its board voting for the first drop in rates since December 2024. What could drive this possible change of direction? Concerns about the potential inflationary effects of tariffs may be lessening, and the Federal Reserve is instead shifting its focus to supporting hiring and employment.
In the video above, Matt Diczok, head of Fixed Income Strategy for the Chief Investment Office, offers perspective on what a rate cut could mean for fixed-income investors. “Start by reviewing your bond investments,” says Diczok. “If lower rates are on the way, shifting some short-term bonds to longer durations could help you lock in higher income before a rate cut pushes yields down.”
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Important disclosures
The opinions expressed are as of 7/17/2025 and are subject to change.
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The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).
