Inflation. Has it peaked?

Too soon to tell. Rates across the curve moved 10-15bps lower for the month, ending May with the 2T at 2.56% and the 10T at 2.85%. Inflation has moved slightly lower over the past couple of months, with Core PCE at 5.2% for March and 4.9% in April (year-over-year). While we are finally seeing a slight improvement in inflation, we will need further downward movement before confidently claiming we’re past…

Tightening. Like waistlines on Thanksgiving.

Take a hike? Rates continued to grind higher in April as the market prepares for an aggressive tightening cycle by the Fed, with the 2T up 26bps and 10T up 56bps. The 2T/10T spread inverted at the beginning of the month but has since turned back positive, ending the month at ~22bps The market is pricing in 50bp rate hikes in each of the Fed’s next four meetings, followed by…

Uncertainty abound, crystal ball is hazy.

Download PDF Fed increase. As expected, the Fed increased the fed funds rate by 25bps to 0.25%-0.50% at its March meeting and revised its median forecast higher to 2.0% by year-end. But the updated dot plot showed a lack of conviction amongst committee members on where rates go from here, with individual forecasts ranging from 1.50%-3.25% (upper bound) by the end of 2022. Chairman Powell continues to say the Federal…