Markets are rapidly coming around to the reality that the Fed has a lot more work to do
History shows that isolated tweaks are rare.
TL;DR
- The 10-year Treasury note yield hit its highest level since 2007, and the 2-year Treasury note yield reached its highest since 2024.
- Market expectations for Fed rate hikes are divided, with some anticipating up to three quarter-point hikes and others believing the hikes may be over.
- Historical data suggests that isolated rate tweaks are rare, and hiking cycles are typically much larger.
- A hot PMI report and comments from Fed Governor Michael Barr have increased the odds of an October rate hike.
- Bond investors are concerned about the total number of future rate hikes, especially as supply-side issues and continued Big Tech spending could fuel inflation.