Bond market expects the Fed to get the job done

Despite all the talk of sticky, structurally higher inflation, Meghan Swiber and the US Rates Strategy team find that after disaggregating the yield curve the message from rates markets may be a bit different than the popular discourse. Yes, the yield curve inversion suggests the market is pricing in Fed rate cuts. But looking at implied real rates suggests these cuts are expected because inflation should come down to the Fed's target, not because of a big slowdown in the economy. As inflation falls, real rates become more positive and the Fed reacts by cutting. We'll also discuss positioning in Treasuries and long term inflation expectations.

 

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