Bonds sold off sharply after the Federal Reserve’s latest rate decision, signaling growing turmoil between the markets and the central bank.

The selloff reflects a deepening credibility shock as investors question the Fed’s commitment to fighting inflation. Yields on Treasury securities surged, with the 10-year note climbing to its highest level in months. The move came after the Federal Open Market Committee held rates steady but signaled fewer cuts than previously projected, catching traders off guard.

Analysts warn that the disconnect could force the Fed into a difficult choice between maintaining policy credibility and avoiding a market meltdown. The dollar strengthened while equities retreated, amplifying concerns about financial stability. This episode underscores the fragile trust underpinning monetary policy and the risks of misaligned expectations.