Bond market pivots
Rate swaps are now pricing several Fed cuts by late 2026 as bond traders pivot from inflation hedges to growth concerns amid surging oil and geopolitical risk — the 10‑year is trading around 4.4%. (bloomberg.com) (x.com)
Swap- and options‑market pricing shows about two quarter‑point reductions almost priced by the September FOMC meeting and roughly 30% odds of a third cut by year‑end, according to Bloomberg and swap‑market flow reports. (bloomberg.com) The Fed left its target range at 3.50%–3.75% at the March 17–18 meeting and the FOMC’s dot plot still implies only one 25‑bp cut in 2026, per the Fed release and coverage of the March statement. (cnbc.com) Brent crude surged in March after the Iran conflict widened, briefly topping about $116 on March 30 and settling above $112 that day, adding near‑term upside to headline inflation forecasts. (ts2.tech) Short‑dated Treasuries have repriced sharply: the Fed’s H.15 and FRED data show the 2‑year yield trading around the high‑3% to low‑4% range in late March (about 3.8%–3.96% on March 30), with short‑maturity yields touching levels not seen since last summer. (federalreserve.gov) Traders have been unwinding inflation‑hedge trades and rotating into positions sensitive to growth and policy pivots, a dynamic flagged in market commentary and a Goldman Sachs note that warned investors may have the Fed outlook wrong. (bloomberg.com) That divergence matters because a Reuters poll shows most economists still expect the first Fed cut later in the year (around September), while G7 ministers on March 30 pledged they stand ready to take “all necessary measures” to stabilise energy markets—either outcome could swing swap‑implied policy paths. (msn.com)
