Context Will Be Curve Play If Fed Hikes: Markets Analysis

Watch on YouTube ↗  |  September 16, 2026 at 09:56  |  3:29  |  Bloomberg Markets
Speakers
Mark Cudmore — Executive Editor, Bloomberg Live / Macro Strategist

Summary

Mark Cudmore discusses the setup in Treasury markets ahead of a Federal Reserve decision. He notes that traders are very bearish with large short positions, but argues the market is already very short and the break above 5% in long-end yields has failed. He sees the Fed hike as likely to restore credibility and push long-end yields lower, favoring long-end Treasuries and a Treasury curve flattener if the Fed hikes. He also flags a fiscal tail risk of higher yields and energy-driven inflation as factors to watch.

  • Treasury traders are heavily short going into the Fed decision.
  • Mark Cudmore takes the other side, expecting long-end yields to fall.
  • A failed break above 5% and a priced-in energy risk premium support his view.
  • A Fed hike could restore credibility and bring income seekers back to the long end.
  • If the Fed hikes, he expects some Treasury curve flattening.
  • Fiscal tail risk and energy-driven inflation remain risks to watch.
  • The main trade setup is long-end Treasuries and a curve flattener.
Ideas
Mark Cudmore Executive Editor, Bloomberg Live / Macro Strategist 0:59
Fed hike may flatten Treasury curve.
If the Fed delivers the hike that is almost fully priced, a bit of curve flattening is expected. A hike that restores credibility should help long-end yields come lower while the front end stays anchored by the hike, and long-term income seekers returning to the long end should support a flatter curve.
US Treasury curve flattener MED
Mark Cudmore Executive Editor, Bloomberg Live / Macro Strategist 1:22
Long-end Treasury yields to fall.
The market is already very short Treasuries along the curve, short positions are very large, and the break above 5% in long-end yields has failed. Energy prices are at highs but the risk premium is now priced in after Trump said the war would continue, so risks are more finely balanced and perhaps asymmetrically skewed to lower yields. If the Fed hikes and restores credibility, long-term structural income seekers who held off during the recent panic should pile back into the long end, pushing long-end yields lower.
Long-end Treasuries HIGH
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This Bloomberg Markets video, published September 16, 2026, features Mark Cudmore discussing US Treasury curve flattener, Long-end Treasuries. 2 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Mark Cudmore  · Tickers: US Treasury curve flattener, Long-end Treasuries