Flat Yield Curve Coming?
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With food and fuel continuing to rally, will the price moves cancel out the Fed's efforts through interest rate hikes to curb inflation? There is currently a 60% chance that we will see 5 rate hikes this year and Crude Oil has not flinched, reaching a Mar 22' contract high.
- Policy errors from Washington & around the world will cause energy prices to remain high.
- The inability for OPEC+ to bring on more production.
- Spare capacity simply is not there.
Moving on to Bonds, the 10yr yield is holding between 1.7-1.9%. Rising rates in the front of the curve will flatten it, which is a precursor to a recession. Are we revisiting 2018-19 inversion levels without the ability to ease? How many rate hikes are actually possible?
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