Lagarde Counters Rate Cut Expectationsđ€
Rates markets pivoted flatter over the session as European front-end bonds traded on the backfoot with Lagarde pushing back against any expectations that rates will be cut in the "next couple of quarters". In the US, the only data of note was the U-Mich consumer sentiment survey, which fell below expectations across both current conditions and the expectations components. On the other hand, the 1-yr inflation gauge jumped back to a 4.4% pace, higher than market expectations, with a corresponding rise in the 5-10yr longer-term metric as well. A rise in long-term inflation expectations have generally bode poorly for fixed income term premium (long end rates higher, curve steeper), which is one of the biggest concerns for the Fed as they do their address entrended inflation expectations.
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