The Federal Reserve did what markets expected this week. It raised the federal funds target range by 25 basis points to 3.75%–4.00%. Normally, a rate hike sounds negative for both stocks and bonds. Higher rates increase borrowing costs and usually put pressure on asset prices. But something interesting happened after the decision. Long-term Treasury yields

Markets are entering Wednesday’s Federal Reserve meeting with a strong expectation. Fed Funds futures are pricing roughly a 90% probability of a 25-basis-point rate hike at the September 16 FOMC meeting. Reuters also reported that most economists now expect the Fed to raise rates. That is a major shift from only a few days earlier.

The U.S. Treasury made an interesting move this week. It announced that it would buy back up to $6 billion of Treasury debt maturing in 10 to 20 years, triple the previous $2 billion maximum for long-dated buybacks. The goal was mainly to improve liquidity in older Treasury securities. Normally, more buying should support bond

Federal Reserve Chair Kevin Warsh’s speech at Jackson Hole quickly became one of the most important market stories of the day. The headline was simple: Warsh sounded more concerned about inflation, and markets increased their expectations for another interest-rate hike. But the bond market reaction was more interesting. The 2-year Treasury yield jumped to around