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Cut Calculus
The US curve disinversion looks to have some staying power.
The 2s10s turned positive Wednesday amid a fairly pronounced bull steepener, as traders pressed dovish Fed wagers in the wake of a JOLTS report which showed job openings across the world's largest economy fell more than expected.
Recall that the 2s10s briefly disinverted this time last month as traders grappled with a historic VIX spike and a total meltdown in Japanese equities. Between Wednesday's JOLTS release and Tuesday's lacklust
Like the oil filter commercial said, pay me now or pay me later. Fomc had their chance at gradualism in July for 25. Sooner or later they are going to have to throw some 50s at the funds rate. They are behind. Latest inflation readings suggest a 1.5-2% inflation rate. Ff 3.5% higher than that is just not tenable. They are courting a banking/credit event, followed by a hard landing. Why take the risk?
Investors see the S&P 500 down 200bp, the Fed sees the financial plumbing working normally.