Bond rally nearing an end?
- Thread starter gharghur2
- Start date
Careful there, my friend. Statements like that can come back and bite.
Could it be that the steepening in the yield curve we are seeing is just a typical move as the market perceives an end to the rate hike cycle? I see that the Fed chose Good Friday to leak a story to Greg Ip about how there is currently no concensus to tighten beyond 5%.
Continues to be a great thread btw.
Yield curve steepenings are also somewhat normal during periods of high long-end corporate supply and Treasury supply as a result of rate-lock hedging needs. Don't forget we had massive corporate supply the last two weeks, especially last week, and have month-end TIPS supply along with the May refunding in plain view. Furthermore, the CMBS market has been quiet, would imagine those deals will pick up again shortly and also weigh upon the market. That being said, based on seasonals, dealers often like to come out of the Refundings with flatteners on, but this may also depend on where the Fed is in their cycle.
It's something like that in the sense that the market is perceiving that a near end to the rate hike cycle would create inflation. While economic data and Fed comments over the past few weeks indicated that we are nowhere near the end of a rate hike cycle, the bond market was incorporating that information by re-integrating an inflation-risk premium.
The bond market is now expecting more rate hikes than recently thought:<br><i>The odds of another increase to 5.25 percent by the central bank's Aug. 8 meeting are 100 percent, up from less than 7 percent three weeks ago.</i><br>- Bloomberg. April 16, 2006 11:09 EDT.
Much appreciated. Thank you.
...and honored you gave my name to your chart.
