It’s been another tough week for all markets. All markets struggling today: equity, currency, crypto and, yes of course, Bonds. Treasuries are extending their selloff and futures are edging down as investors steel themselves for a quicker pace of policy tightening from the Federal Reserve.
This next graph says it all. Please share this with friends, colleagues, peers, and clients. The upward slope of mortgage rates is real.
Fed Chairman Jerome Powell on Thursday signaled the central bank was likely to raise interest rates by a half-percentage point at its meeting in May. This year’s bond rout is getting worse as global central bankers turned more hawkish with every passing day. Fed Chair Jerome Powell’s appearance at an IMF-hosted panel capped another week of pivots toward aggressive tightening as he said a half-point hike is definitely on the table for May. Swaps traders promptly baked in outsized increases for May, June, and July — setting off fresh routs for bonds and stocks.
Even the European Central Bank joined the chorus, with officials signaling that Euro-zone borrowing costs are likely to move up in the second half for the first time since 2011.
Policy makers’ strident aggression had some of the few bond bulls left out there pulling in their horns. Barclays’ analysts ditched their bets on Treasuries after the 10-year yield topped 2.6% — it tested 3% not that long after.
Please remain safe and healthy, enjoy the weekend and first, make today great.
Do you have questions about the current economic outlook? Reach out anytime. We’re always happy to help!