Did Rates Just Realize They're Invincible?

Abstract

Did Rates Just Realize They're Invincible? Want to see an interest rate that isn't worried about going much higher? Start with record low rates. Hit the highest levels in roughly 15 years, all the while referencing the threat of ever-higher inflation and a Federal Reserve that is more willing to hike the Fed Funds Rate than to worry about recession. Lastly, hit the market with a much hotter-than-expected inflation report and jack up Fed rate hike expectations to 100bps for the subsequent meeting and observe the bond market's reaction. If rates end the day lower, they might be invincible. 7 vs 0.6 f'cast, 0.6 prev Annual CPI ....... 9.1 vs 8.8 f'cast, 8.6 prevCore Annual CPI 5.9 vs 5.7 f'cast, 6.0 prev sideways to slightly stronger overnight. 10s currently down just under 2bps before CPI. MBS are unchanged. Super strong 30yr bond auction brings 10yr back near lows of day, down 5 bps at 2.919.