Administration Pressure on Fed Sparks Investor Concerns Over Yield Curve Article originally posted on Globe St. on September 19, 2025 Donald Trump’s latest pressure campaign on the Federal Reserve has rattled markets, with critics warning that efforts to force deeper rate cuts could undermine confidence and steepen the U.S. Treasury yield curve, raising longer-term borrowing costs. The President has repeatedly criticized the Fed for acting too slowly and has threatened to reshape its leadership, from earlier attacks on Chair Jerome Powell to more recent remarks about Governor Lisa Cook. That drumbeat of political interference is weighing on sentiment among global investors. “If politics bends policy, I’d fade rallies in the dollar and stay nimble on duration,” Gareth Nicholson, chief investment officer at Nomura International Wealth Management, told the Reuters Global Markets Forum, calling the dollar and long bonds the “first shock absorbers” when confidence erodes. Markets have already started to react. The yield on the 10-year Treasury note, a benchmark for commercial mortgages and other long-term borrowing, had been trending toward 4%. But after Wednesday’s quarter-point rate cut, yields reversed course. By early Friday morning, the 10-year was trading at 4.125%, a sharp move higher. “The issue with rates ends up being that we understand that we should not be cutting rates right now, and the fact we are cutting rates now makes the system much more artificial,” Giacomo Santangelo, a senior lecturer in economics at Fordham University, told GlobeSt.com. He said the cuts were already steepening the curve. Santangelo also pointed to tariffs imposed earlier this year, warning that labor markets are only now feeling the effects and inflation pressures could worsen. Broader risks extend beyond U.S. policy. Ali Meli, managing partner and chief investment officer of Monachil Capital Partners, said in an interview that long-term debt markets are entering “precarious times.” Investors have more alternatives, he noted, while central banks — particularly in emerging markets — are diversifying away from sovereign bonds and into gold. “That has disrupted the traditional source of demand for long-term sovereign bonds, and we are seeing signs of that in the U.K., as well as in the United States,” Meli said. He added that political instability in Europe, including France and potentially Spain, is likely to compound global pressure on bond markets. That dynamic, Meli said, leaves marginal investors looking for higher yields to compensate for inflation risks. But he cautioned that relying on rate cuts alone is unsustainable. “Absent a cut in spending, pushing the Federal Reserve to cut the rates could risk moving the inflation expectations higher and disrupting the long end of the yield curve. That in turn would destabilize the markets, as well as the financial well-being of the Federal government.”