May 22, 2023

Volatility Reports 5/22/23 Bonds

The dog waging the equity market tail is the credit markets. Who let the dogs out?

Interest rates hit their March 13, 2020, the 30-year T- bond market hit an all-time high (ATH) on the same date.

Over the next 19 months later risk traders ignored in general the run of higher credit rates until the Fed began following the market, its client’s market.

Near the first day of spring, two years from that (ATH) for the long bonds the Federal Open Market Committee enacted the first-rate increase on March 16, 2022. That hike was followed by seven more interest rate increases with an assumed end of fighting inflation May 3, 2023. Don’t take the irony the wrong way, but that was the high pivot on the right-hand side topping process ending the most recent counter trend rally.  Another endorsement of my Contrary Thinker moniker. (See weekly chart below.)

Today the bulls are hoping for a recession because they think that will lead the Fed to lower rates with today many of the big Wall-Street banks calling for the Fed to do just that.

The Street’s problem with that is whatever the bond market wants the bond market gets, and the market wants to get paid more…

This work by Jack Cahn is licensed under a Creative Commons Attribution-NonCommercial 4.0 International