📝Market Is Trying to Front-Run The Fed For 5th Time This Cycle: Nordea

Even at 5.5%, measures such as the Taylor Rule, suggests policy is too loose. We fully understand that the Fed is cautious about raising rates further, wanting to take the time to gauge the effects of past increases. With the Fed still unsure if they have tightened enough, a lot of things needs to go wrong before they are sure policy needs to be loosened. We believe this will take at least all of next year. Absent lower fed funds rates, abundant supply of US Treasury notes and bonds will keep upward pressure on longer term rates. We expect the current FOMO-driven bond rally to soon fizzle out, making it the 5th false start (and probably not the last) in this cycle. We expect a volatile environment for bonds going forward and for 10Y rates to revisit the 5% mark before too long.

- Nordea