Economics
Stock-Market Bravado Tested as Bonds Flash Fed Policy Danger
- Flat yield curve divides a market prepping for rate hikes
- Defensive trades rise as bonds suggest economic worries
Photographer: Spencer Platt/Getty Images
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The fastest inflation print in nearly 40 years is rattling nerves on Wall Street where economically sensitive trades are hitched to an ultra-accommodative Federal Reserve.
The spread between five- and 30-year Treasury yields has narrowed relentlessly this quarter, with that curve now near the flattest since March 2020. It’s a sign bond traders are betting faster rate hikes will undercut the red-hot economic expansion, possibly disrupting the business cycle in the name of inflation-fighting credibility.