It’s been nearly a month since two-year U.S. Treasury note yields hit a cycle high of 5.07% on March 8th, the highest level since mid-June 2007, and all seemed orderly with Federal Funds Futures and the FOMC in sync regarding more rate hikes and the ‘higher for longer’ stance by policymakers. Indeed, while there is always an opposition party when it comes to more rate hikes at the end of any meaningful tightening cycle, the underlying economic data appeared to be congruent with the FOMC party line that inflation has come down, but not enough and the labor market remains historically tight, with lofty wage gains a real threat to mire the economy in a low growth, inflationary environment if not met with more rate hikes. Since then, markets have absorbed the shockingly rapid demise of Silicon Valley and Signature banks, mounting concerns of a meaningful credit contraction led by regional/community banks and, more recently, the start of what appears to be a long-awaited cooling in labor markets.
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