Bryant Bank Market Update - June 16, 2022

Good morning, the treasury selloff is resuming after the Fed’s largest rate hike since 1994—75 basis points—spurred an all-too-brief relief rally.?Here’s where benchmarks are trading now:?

The 75bp hike wasn’t surprising after Friday’s jarring CPI and consumer sentiment data; markets were already pricing in a near-100% chance it would happen.?And while Jerome Powell made a point of saying 75bp hikes will not become commonplace, futures contracts already imply another 75bp move is likely coming in July as well.

Other central banks are making similarly hawkish moves, but they can only do so much as the primary drivers of inflation are exogenous, global supply shocks—most notably the invasion of Ukraine and ongoing large-scale quarantine measures in China that continue to disrupt supply chains.??Higher rates are unquestionably warranted in order to combat inflation, but they also make it more difficult to avoid recession, which is now seen as a virtual certainty by many economists.?

European leaders are visiting Kyiv today, and President Biden announced another $1 billion in military aid for Ukraine yesterday in hopes of rallying NATO allies.?All eyes are on the Fed, but positive developments in Eastern Europe would likely do more to fight inflation than any central bank.

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Quote of the Day

“There are no passengers on spaceship earth.?We are all crew.”?--Marshall McLuhan