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Stocks Erase CPI Spike Gains, Yield Curve Steepens After Brainard Comments

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by Tyler Durden
Tuesday, Apr 12, 2022 - 06:07 PM

Update (1400ET): Nasdaq, S&P, and the Dow are now all back in the red, having erased all of the post-CPI spike gains after The Fed's Lael Brainard reiterated her hawkishness saying that The Fed will move “expeditiously” to raise interest rates and return surging inflation to its 2% target, and added that a decision on the balance sheet “could be as soon as May, which would lead to reductions in that balance sheet starting in June.”

The Treasury curve is steepening dramatically as all but the 30Y yield are extending their post-CPI declines...

Gold has held its gains even as the dollar reversed its losses and turned positive.

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On the basis that the CPI prints were "not as bad as they could have been", US markets have reacted as if The Fed can step back from its hawkish stance and all will be well in the world.

Rate-hike expectations have eased modestly for the year... although the market is pricing in a 97% probability of 50bps hike in May(up from 92%)...

That appears to have prompted a panic-bid in stocks - dominated by long-duration growthy stocks...

And sending bond yields tumbling lower, with the belly 5Y/7Y outperforming (-10bps)

Gold is also spiking after CPI...

As the dollar dives...

The question is - how long will these kneejerk moves last?

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