Bond Market Attempts to Bully the Fed

January 16, 2024

Bond Market Attempts to Bully the Fed Photo

Despite mixed readings from last week’s inflation prints, the bond market continues to put pressure on Federal Reserve (Fed) policymakers to follow through with rate cuts arriving sooner rather than later. Fixed-income investors are now placing more than an 80% probability for a March rate cut1 while the 2-year Treasury closed Friday more than 100 basis points below the current federal funds rate.2 Today’s bond prices are moving beyond just a ”soft landing” for the U.S. economy, seemingly anticipating a more rapid decline in economic growth and inflation than most economic forecasters inside and outside the Fed think likely.      

Highlights from this week’s economic calendar include retail sales and industrial production on Wednesday, housing starts on Thursday and the University of Michigan consumer sentiment on Friday.3



1Yahoo! Finance – Record Fed Funds Trade in Futures Points to Short Cover; 1/12/24

2U.S. Department of the Treasury – Daily Treasury Par Yield Curve Rates; 1/12/24

3MarketWatch – U.S. Economic Calendar; as of 1/16/24

Tags: Bond markets | Inflation | 2-Year Treasury | Economic indicators | U.S. economy

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