“This is at least the seventh time this cycle that market expectations for a dovish central bank pivot have increased,” Allen wrote in a report. The problem, he continued, is that “expectations of policy change may actually make it less likely, as it eases tough financial conditions while central banks feel need to tighten to reduce inflation."
Allen emphasized that “last week was the week the 10-year real yield fell the most this year” and said that such fluctuations in yields related to the economic situation “could unintentionally cause interest rates to be more more likely to increase.
The last time traders bet on a Fed pivot in the recent cycle was in March, when the failures of several US regional banks prompted markets to consider sharp interest rate cuts. strongly starting from the end of this year. At that time, the 2-year Treasury yield fell to a 2023 low of 3.55% and the 10-year Treasury yield to about 3.25%. Instead, the Fed has created a basis for banks to prevent financial instability and policymakers to continue tightening.
Allen emphasized that “last week was the week the 10-year real yield fell the most this year” and said that such fluctuations in yields related to the economic situation “could unintentionally cause interest rates to be more more likely to increase.
The last time traders bet on a Fed pivot in the recent cycle was in March, when the failures of several US regional banks prompted markets to consider sharp interest rate cuts. strongly starting from the end of this year. At that time, the 2-year Treasury yield fell to a 2023 low of 3.55% and the 10-year Treasury yield to about 3.25%. Instead, the Fed has created a basis for banks to prevent financial instability and policymakers to continue tightening.
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