Fed’s Higher-for-Longer Mantra Has Doubters in Bond Market
- Smart money looks at 2024 rate options as hedges on Fed cuts
- Slowing pace of data seen keeping 2024 recession trade in play
The longer rates stay elevated so does the risk of a downturn, and at the margin there are more signs of consumer stress as higher borrowing costs and weaker hiring start to erode household spending.
Photographer: Hannah Beier/BloombergThis article is for subscribers only.
Amid signs the bond market has bought into the Federal Reserve keeping interest rates higher for longer, a cohort of investors is placing bets on the economy hitting a wall — and a sharp policy reversal in short order.
Treasury yields have settled into tight ranges this month near the highest levels in more than a decade as data show a resilient economy and inflation still well above the Fed’s 2% target. But with yields anticipating a peak in the policy rate, the outlook for growth takes on greater importance.