With the Federal Reserve already partway there, markets are now expecting Jay Powell to go much further. The FOMC at its last meeting surrendered on further rate hikes. This Fed “pause” was obviously intended to reassure these same markets. Instead, they saw it for what it really was: chickens, not doves.
Over the last several weeks, curves have utterly collapsed. You have probably by now heard about inversion. Yes, the yield on the 10-year US Treasury bond is about 4 bps below the equivalent yield for the 3-month T-bill. It is but the latest indication that things are going wrong. There have been serious warnings stretching back nearly a year already.
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