April 28, 2022

Head Fake

Two key bond market trends have resumed: a flattening Treasury curve and widening risky spreads. Both trends will have legs as the Fed endeavors to dampen demand and tame inflation. Severe Chinese lockdowns are stagflationary for the U.S., but ultimately will be positive for long-term Treasurys. Despite Fed asset sales, Agency MBS will outperform lower-quality spread product as the economy weakens. This week we also provide a sneak peek at our new state-of-the-art Yield Curve Trading Indicators that use machine learning to identify profitable trading positions.