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US Rates Valuations BofA

#InflectionPoint Somehow I see the point. Coming from over 30 years bull market, it is somehow hard to switch the mindset. However, the fact is that US 10-year real rates plus the 10y – 3M slope are at the lowest point since the 50s. Hard to be long unless one is sure about the incoming recession! Germany 🇩🇪 ain’t looking better (worse actually) with 10y rates at 2.7% and inflation still above 6%. Typically I am bullish on bonds, but I think some mental flexibility is crucial! #rates#inflation#fed chat by Bank of America.

US Real Rates

As U.S. real interest rates continue their steady ascent, and yield curves begin their steepening trajectory, it’s a curious turn of events, given the Federal Reserve’s Chair, JPOW’s, rather hawkish tone in the recent last press conference.

US Curves Koyfin

This price action has put a spell on the markets, with the primary concern now being the potential fallout of long-term rates to break free from their moorings, even as the Fed’s hiking cycle is coming to an end. I am not sure yield curves are actually pointing to a reflation scenario, it seems there are forces at play and they pose a serious threat to risk assets. I certainly hope not, but the Fed would find itself in a very uncomfortable position if it had to choose between the de-anchoring of long-term rates and boosting a sluggish economy! It could resemble a classic Emerging Market crisis, a formidable challenge that would undoubtedly put the FOMC’s resilience to the test!



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