One number shows why the economy might not get the immediate relief many hope for

• The 10-year Treasury yield is the key rate to watch for many borrowers.
• The bond yield has been rising, not falling, since the Fed announced its big rate cut.

The most important interest rate for borrowers in the US is moving higher, not lower, after the Federal Reserve's jumbo rate cut on Wednesday.

That rate is the 10-year US Treasury yield, a key lending benchmark for everything from mortgages to corporate debt.

The 10-year Treasury yield rose to an intra-day peak of 3.77% on Thursday, higher than before the Fed cut the federal funds rate by 50 basis points on Wednesday.

The rate on the 10-year bond closed at 3.65% on Tuesday.

The divergence in a falling federal funds rate and a rising 10-year Treasury yield highlights the ultimate truth in markets, which is that they're forward-looking, and investors had adjusted their outlook for rates long before the Fed decision.

That's evidenced by the fact that the 10-year US Treasury yield had already dropped 125 basis points from its 5% peak in October 2023, when it became clear that the Fed was done hiking rates.

According to NYSE senior market strategist Michael Reinking, the slight bump in the 10-year Treasury yield suggests investors are feeling good about a potential soft landing in the US economy, as such a scenario would suggest the Fed doesn't need to cut rates as much as aggressively as the market previously thought.

"The reaction within Treasury markets was most telling yesterday. Fixed income markets were pricing in a very aggressive rate cutting cycle suggesting some skepticism with the soft-landing narrative. The aggressive action taken yesterday seems to have acquiesced some of those concerns, potentially leading to a less deep cutting cycle," Reinking said.

However, it also means the 10-year Treasury is moving higher since the decision.

The move highlights the fact that the Fed's short-term lending rate doesn't have the impact on long-term borrowing rates — for instance, the 30-year mortgage rate — that many may have been hoping for, and rate cuts might not end up providing much relief for borrowers.

Mortgage rates barely budged on Wednesday, while short-term interest rates on high yield savings accounts and money market funds dropped within 24 hours.

The 10-year Treasury yield is a lending benchmark for everything from home loans to corporate debt. While companies and consumers have both seen some relief from lower interest rates since they peaked in October 2023, it might be a while before they see rates come down further.

Freddie Mac data shows the average 30-year fixed mortgage rate is 6.2%. That's well below its peak of nearly 8% but still above the 10-year average of about 4.4%.

For rates to fall further and for companies and consumers to get more relief in the form of lower borrowing costs, the 10-year Treasury yield needs to move lower — and that probably won't happen until the Fed turns more dovish and continues cutting rates.

"US Treasury yields rebounded to a certain extent after the Fed's rate cut but could remain exposed to the downside... The dollar and Treasury yields may remain capped and could decline as new cuts are expected during the coming months," Exness financial markets strategist Inki Cho said in an email to Business Insider.

Fed officials expect to lower rates by an additional 50 basis points by the end of this year, followed by another 100 basis points of interest rate cuts in 2025. However, markets see steeper cuts this year and next, according to the CME FedWatch Tool.

According to Carson Group global macro strategist Sonu Varghese, much of the move in interest rates has to do with Fed Chairman Jerome Powell's comments on Wednesday, in which he strongly defended the economy and said the Fed would not tolerate a higher unemployment rate.

"The Fed's essentially putting a cap on the unemployment rate, or a floor under the economy - it's as if the strike price of the Fed put went up. That's positive for the economy, and in that case yields should be higher. If the market didn't buy the Fed's guidance, and thought they were behind the curve, I think long- term yields would head lower (pricing in higher risk of recession)," Varghese told Business Insider.