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Bond Traders Stunned by Hawkish Fed Are Sounding Growth Alarm

  • Ten-year yield falls below 5-year rate, first time since 2020
  • Debt traders brace for fresh losses as U.S. hikes rates
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WATCH: Marathon Asset Management CEO Bruce Richards expects markets to feel the pain after the fifth rate hike. Source: Bloomberg
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Defying their stock-market counterparts, Treasury traders aren’t buying Jerome Powell’s upbeat pronouncements about the economy. In fact, one bond-market indicator has started flashing red for the first time since the darkest days of the pandemic.

After the Federal Reserve raised interest rates on Wednesday and signaled hikes at all six remaining meetings this year, a part of the Treasury curve -- the gap between five- and 10-year yields -- inverted for the first time since March 2020. Meanwhile the difference between two- and 10-year yields continued to narrow.