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Bonds & Stocks Rebound As Market Prices In Full Rate-Cut In Q1 2023 After CPI Shocker

Tyler Durden's Photo
by Tyler Durden
Wednesday, Jul 13, 2022 - 02:56 PM

Update (1055ET): The one redeeming feature is that the market is now pricing in one full rate-cut in Q1 2023 (as The Fed fights off the recession it created).

This prompted a huge reversal in bond yields (with all but the 2Y now lower in yield on the day)...

And lifted Nasdaq back into the green...

The bipolar market is back...

*  *  *

Well that wasn't supposed to happen.

It seems 'peak inflation' is not here and markets are stunned.

Rate-hike expectations are soaring (and 100bps of rate-cuts are now priced in for next year)...

With the odds of a 100bps hike in July now at 30%... (and 150bps is fully priced-in now over the next two meetings)

We know where to look for confirmation...

All of that has sent stocks violently lower...

The euro briefly traded below parity...

And bond yields aggressively higher (with the yield curve flattening dramatically - 2Y +14bps, 30Y +5bps)...

The yield curve (2s30s) is back near its lowest since 2007 and on the verge of inversion again...

When will stocks look through the recession and start pricing in the next round of QE?

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