While short-term interest rates have dropped this year as the Federal Reserve has begun cutting interest rates, long-term rates have risen amid economic resilience.

The three-month Treasury bill yield has dropped 67 basis points in 2024 to 4.73%. But the 10-year Treasury note yield has risen 31 basis points to 4.19%

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Short-term rates directly reflect the Fed’s rate policy. And it slashed the federal funds rate target by 50 basis points last month to 4.75%-5%. That rate applies to overnight interbank loans. Banks lend money to each other to keep their reserves stable.

Many experts anticipate the Fed will continue trimming rates. Interest-rate futures indicate an 89% chance of a 25-basis point cut at the central bank’s next meeting Nov. 6-7. The remaining 11% see no change, according to CME FedWatch.

Here’s the scuttle on long-term rates

Fed rate reductions tend to stimulate the economy and inflation. That’s why long-term rates are rising. Already, GDP has grown at an annualized rate of 3% in the second quarter. And the Atlanta Fed’s forecasting model calls for 3.4% in the third quarter.

Harvard economist Larry Summers is an expert who believes long-term rates stay high. “Markets should be getting used to rates in current ranges for the foreseeable future and probably long rates above current levels,” he said in a June 4 webinar cited by Bloomberg.

Related: Fed official's latest words reignite interest-rate cut debate

The 10-year Treasury yield stood at 4.33% that day.

Higher long-term rates are a good thing for investors who hold bonds until maturity, because they’re locking in a lofty rate.

If you’re looking for bonds with higher interest rates than Treasuries, you might consider investment-grade corporate bonds. Keep in mind that you’re sacrificing some safety for the higher yields. A 10-year single-A-minus JPMorgan Chase bond yields 5.06%.

T. Rowe Price's view on long-term interest rates

Arif Husain, head of fixed income at renowned fund manager T. Rowe Price ($1.63 trillion of assets), looks for long-term rates to rise soon.

“Market consensus expects the yield on the 10‐year U.S. Treasury note to decrease with the Fed kicking off a rate-cutting cycle,” he wrote in a commentary.

Related: Druckenmiller, Summers deliver blunt messages to Fed on interest rates

“But could a combination of factors— not least fiscal largesse in a U.S. election year — push the 10‐year Treasury yield up from its near 3.80% level in early October?” His answer is yes.

As for fiscal policy, the budget deficit totaled $1.8 trillion in the fiscal year (2024) ended Sept. 30.