Macro Report/Insights: Market Update

Key SOFR Chart!

This will be an important article to frame some changes that have taken place this past week:

First, interest rate expectations for the next two meetings have been moving all over the place with these FED speeches. One governor suggests two hikes and then the next suggests the opposite.

I often hear people say, “The bond market is the market of truth.” This is totally false. The bond market will move on the smallest bit of news or data releases these days.

Let’s remember the big picture though. I laid out my view in the macro report, stating that I believe the preconditions for a recession sometime in H2 are likely. However, it is unlikely that the FED will cut preemptively into this due to the LEVEL of inflation.

Remember the chart that I noted in the previous article (this is a really important chart!): The SOFR spreads are beginning to converge now, which is causing a rally in bonds led by the long end.