by Craig Hemke, Sprott Money:

Though we just wrote about this last week, Tuesday’s “emergency” fed funds rate cut demands that we write this update. Why? Because the bond market action in the hours since foreshadows even more cuts later this month, and this will have direct implications for gold, silver, and the U.S. dollar.

So let’s begin with last week’s link. If you missed it, that’s OK. Here’s your chance to read it now: https://www.sprottmoney.com/Blog/powell-painted-in…

It was just eight ( long) days ago that we explained for you WHY a fed funds rate cut was imminent. When that previous post was written, the yield curve in the U.S. looked like this:

As you’re likely aware, yesterday (Tuesday, March 3) The Fed suddenly cut the fed funds rate in an attempt to bring it in line with changes in the bond market and provide added liquidity against an expected economic slowdown due to the worsening global coronavirus pandemic. In response, COMEX digital gold prices rallied over $50 and the U.S. dollar continued an eight-day plunge of nearly 3%.

But it was the action in the bond market that was the most noteworthy, and you must understand what this implies for Fed policy ahead of the next FOMC meeting in two weeks.

Below is the post-cut chart of the yield on the U.S. two-year Treasury note:

And check the post-cut reaction in the yield on the U.S. 10-year note:

So now the bond market has again painted Chairman Powell into an even deeper corner. Check the latest rates in the same format as posted last week and copied above:

• Fed funds (overnight): pegged at 1.00-1.25% for an “effective rate” of 1.15%

• the U.S. two-year note: 0.64%

• the U.S. ten-year note: 0.98%

• the U.S. thirty-year bond: 1.62%

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