‘Unstability’ weighs over Fed’s options to cut rates: Strategist

Yahoo Finance Video and Julie Hyman

Tue, February 17, 2026 at 8:00 PM GMT+9

Schwab Center for Financial Research fixed income strategist Cooper Howard shares his outlook on US Treasury yields (^TYX, ^TNX, ^FVX) and what the Federal Reserve’s interest rate policy could mean for the economy, mortgage rates, and the yield curve.

Also, catch Cooper Howard compare how January’s jobs report contrasts with recent labor revisions.

To watch more expert insights and analysis on the latest market action, check out more Market Catalysts.

Video Transcript

00:00 Julie

So what does all of this then end up meaning for rates, right? Um for this year? Do we see yields kind of stickier at a at a higher level?

00:10 Cooper

You know, I do think that we see longer-term yields being stickier at a higher uh level, Julie. Um a couple of reasons for that is if we break down the composition of say the 10-year US Treasury yield, you can break it down into expectations for the Fed funds rate, inflation expectations, and then this kind of catch all that we call the term premium in the fixed income markets. And really that’s just the compensation for the unknown or the compensation for uncertainty that’s out that’s out there.

00:46 Cooper

And my colleague Lizanne Saunders really likes to use a good term called the unstability that we’re seeing. Not necessarily the or the instability, not necessarily the uncertainty because the future is always uncertain. It’s we’re seeing a lot of instability in the market right now, whether it’s concerns over the federal funds rate, higher debt levels at the federal side, concerns over what’s happening on the federal side of things.

01:10 Cooper

And that should really keep that term premium elevated going forward and therefore probably put a floor on how much lower longer term yields could potentially go.

01:21 Julie

So and this is something a theme we’ve explored before. So that could mean even if we see the Fed continuing to cut rates, for example, mortgage rates might not come down and stimulate the job the the housing market.

01:42 Cooper

Exactly. And that’s something that we have a lot of conversations with with many of our investors and the differences between short-term interest rates and longer-term interest rates. And it tends to be that mortgage rates are priced off of longer-term interest rates. So the 10-year Treasury for example. So if the Fed does continue to cut interest rates and like we mentioned earlier, we are in the camp of they are going to continue to cut rates this year. That should pull the short end of the yield curve lower and we expect it to steepen the yield curve, meaning that short-term rates move down lower than longer-term rates.

02:16 Cooper

But in terms of where ultimately mortgage rates could go, that’s more of a narrative of what’s going to happen with longer-term rates and we do think that that doesn’t look like there’s too much more downside with where we could go with longer-term rates in this market.

02:26 Julie

Gotcha. Not great news then for people wanting to buy homes. Thanks so much for coming in Cooper. appreciate it. Take care.

02:32 Cooper

Thank you, Julie.

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