The biggest moment in June trading was the surprisingly hot June US CPI report. That was the domino that led to the Fed hiking by 75 bps instead of 50 bps and kicked off the turmoil that followed.
Yet in the bond market, we're now back to where we were before the release at 2.83%. That wraps up a round trip that ended at 3.45% and is looking more like a blow-off top now than a re-thinking of the Fed path.
The increasing focus now is on growth and the potential for a recession. I've written often in the past few weeks that +3% yields for two years are an attractive proposition if you think more pain is coming. The market has come to a similar conclusion.
What makes the move a bit tough to digest for the broader market is that it's come largely at the end of the quarter. We could see some retracement in the days ahead, or at least we'll be watching for one.
