• Meanwhile in markets, more pain for equities, credit and peripheral bonds while the dollar and commodities remain on a tear. Furthermore, Fed Chair Powell’s attempt of putting policy on auto-pilot for a few months and talk down market pricing for 75bps rate hikes has backfired completely.
  • At pixel time the US 10y was trading at 3.05, up 10bps from pre-FOMC levels and up 15bps from the Powell press conference lows. We interpret the bear-steepening of the curve as the market exacting revenge on the Fed taking a too timid approach on inflation. If Powell & Co were more hawkish, the curve would have flattened. OIS pricing for the Fed terminal rate hike is still down though, trading 3.31 vs 3.40 pre-FOMC. But we have no doubt that markets will push forwards higher. A case in point are July Fed funds futures, which have priced in 62bps of hikes at the June meeting. Which suggests strong odds of a 75bps hike next month.


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