Russian Sabre Rattling Curtails Equity Rally...Treasuries Rally Steepen Again
There are too many things going on to determine where rates are going to finish in today's Holy Thursday trading, where bonds are scheduled to close at 2 PM EST...3-10 are better by 4-5 while 2 and 30's are better by 2+... 2/10 are hovering at 35, currently 33+... We see support at 48... Not sure the short end short covering is over, but we do expect bond yields to start to rise again next week... Fed governors continue to talk very hawkish, although we saw some push-back from Brainard earlier in the week. Waller was out yesterday pushing 50 basis hikes until the Fed gets to neutral... Which is being debated... Williams will be speaking shortly, Harker and Mester after the markets close... But we saw a Blackrock report that we quote
"BlackRock strategists challenged traders betting the Fed will raise rates to around 3% next year, saying it'll go to 2%, but not much further. An overly aggressive path of hikes to combat the spiraling cost of living may backfire, according to the BlackRock Investment Institute, which estimates that bringing inflation down to the target of 2% may push unemployment to almost 10%."
Strong words from one of the largest money managers in the world.. So there are those that think, like us, that the Fed will slowdown as numbers start to slow... We expect the housing numbers to start to slump in the June time frame, and look bad through the fall... Supply chains are still an issue with China shutdown and other supply chains struggling.. But it does seem like the car sales and truck sales are slowing now..
Equities... 2 trillion of options expire today...we detailed the breakdown yesterday... The equity markets do not trade like this is a major event...Equities peaked at 1.30 am and moved down 20 points to where we are now...Putin talked about putting nuclear weapons in the Baltic if Finland and Sweden join Nato....he is looking more like Stalin every day... Biden continues to challenge him in his stump speeches, we can't see how it ends well... But for now the markets are generally ignoring it... But there should be a bid in bonds as we end the week.
We read a Michael Burry post in BB..." Michael Burry blasted Fed policy again. The bank has no intention of fighting inflation, he tweeted. Serial half-point rate hikes are for getting elevation before stocks and the consumer tap out. The same goes for rapid-fire QT, the Scion Capital founder said. "The Fed's all about reloading the monetary bazooka. So it can ride to the rescue & finance the fiscal put."
Lots of contrary views to the standard street view of multiple hikes . If we see a close to 2 years below 2.37, we could see another run to the 2.20 range before the bear rally is over...