Market Braces for Inflation Data and Earnings Season Amidst Rising Yields.
Treasury yields rose on Monday, led by the 3-month T-bill rate, as traders priced in a higher chance of the fed-funds rate going above 5% next month. Investors are awaiting the next major U.S. inflation update in two days, with expectations that the annual inflation rate will come in a bit above 5%. The market is underestimating how long it may take to get to the Fed’s 2% inflation target, and rate cuts are not in the Fed’s ‘base case’ so there will need to be a lot more damage for the economy and markets before we get anywhere close to this number.