Understanding what the bond market is pricing across its many dimensions is not useful because it tells us what’s going to happen - actually, its predictive abilities aren’t always great.
Exactly one year ago, fixed income markets were expecting the Fed to hike by 25 bps in 2022 - instead, only 8 months in the Fed has already delivered 225 bps worth of hikes and another 100+ bps are highly likely.
It’s instead a very useful exercise because the bond market is the biggest and most liquid building block of the ‘‘global markets pyramid’’, and as such fully grasping its multi-dimensional signals is crucial to understand where consensus lies.
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