Treasury yields are soaring higher this morning, seemingly triggered by a hawkish note by Citi economists calling for an even more aggressive Fed this year than the market is pricing for…
Citigroup economists boosted their forecast for Federal Reserve interest-rate increases this year and now see 2.75 percentage point of hikes – including four straight half-point moves – amid persistent inflation.
In addition, “we expect the Fed to continue hiking into 2023” and sending the benchmark rate to a range of 3.5% to 3.75%, analysts led by Andrew Hollenhorst said in a research note Friday.
That’s well beyond the 2.8% level that central bankers expect to reach, based on the median of projections released last week.
“Risks to the terminal policy rate remain to the upside given the upside risk to inflation,” the economists said.
The short-end – as one would expect – is getting hit hardest but the entire curve is bear flattening (2Y +10bps, 30Y +4bps)
Meanwhile, as rate-hike expectations surge (market now pricing in more than 8 further 25bps hikes this year), the subsequent rate-cut expectations are also rising for 2023/4…
Crypto is rallying here as gold fades and stocks tumble at the cash open.