Citadel Securities suggests that long-dated Treasury yields are poised for stabilization, a view attributed to the Federal Reserve's heightened credibility in its pursuit of lower inflation. This outlook is detailed in a client note by Nohshad Shah, Citadel's head of EMEA fixed-income sales. The firm highlights that Chairman Kevin Warsh's dedication to combating inflation is a key factor bolstering the Fed's credibility, which in turn supports long-dated Treasury yields and a reduced term premium.
This perspective comes after a period where long-dated Treasury yields had reached levels not seen in nearly two decades, even with policy rates significantly below their peak. Citadel Securities previously noted that the Fed's reluctance to tighten monetary policy in the face of prolonged above-target inflation was a contributing factor to these multi-year high yields and broader market risks.
Recent market activity further supports Citadel's stabilizing outlook. Following remarks from Federal Reserve Governor Christopher Waller on September 3, 2026, indicating a preference for holding interest rates steady if disinflationary trends continue, Treasury yields across the curve experienced a decline. For instance, the 10-year Treasury note yield fell more than 2 basis points to 4.772%, and the 30-year Treasury yield dropped over 1 basis point to 5.254%. This reaction in the market aligns with the idea that a "hyper-credible Fed should be good for long end rates," as stated by Shah.
