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Stocks Puke As Soaring Inflation Sparks Hawkish Moves In Money Markets

Tyler Durden's Photo
by Tyler Durden
Wednesday, May 12, 2021 - 09:04 AM

US equity markets just got monkeyhammered, with Small Caps and Big-Tech hit the hardest and unable to hold the bounce...

Inflation breakevens ripped up near their 2004 highs...

Lifting 10Y yields to 1.65%...

And money markets are increasingly pricing in a rate-hike by Dec 2022...

Today's CPI erases the 'dovishness' of the weak jobs print...

The CPI print prompted inflation swaps, caps and floors to price in a 42% chance of CPI being above 3.00% in 5 years...

Of course, this is all transitory and the fact that the dollar has already erased its 'hawkish' spike suggests the market doesn't see this shifting The Fed's dovish stance...

However, as Vijay Patel notes, today's print may kickstart tapering talk more broadly within FOMC ahead of 2H21 decision... and raise the possibility of the Jackson Hole policy-pivot.

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