Bond buying on bets for Fed cutting cycle 'misplaced,' MRB Partners says By
2024-05-19 00:20:05
2411 -- Investors continued to buy on bets for aremain "misplaced," as inflation remains sticky,  investment research firm MRB Partners said in a Friday note

"Bond investors remain biased to betting on lower yields, in the mistaken belief that a meaningful rate-cutting cycle is approaching," MRB Partners said in a Friday note. "We continue to disagree with this view and are underweight bonds."

The bullish bets on bonds, which pressured yields, were juiced by week’s U.S. CPI report, which was close to the consensus following

As was the case with "April's employment report, these data should provide reassurance to Chair Powell that current guidance that the next move is likely to be a cut remains appropriate," Macquarie said in a recent note.

an annualized basis. 

The pressures on inflation from sticky super core inflation are likely to persist until an "economic downturn kills labor’s bargaining power and companies’ ability to lift prices," according to MRB Partners. 

Despite the softer inflation print, the chorus from Fed members this week following the data appeared to be one of caution. 

Speaking after the April CPI release, New York Fed President John Williams suggested there was no evidence yet in his mind pressing for a rate cut.

"I don't see any indicators now telling me...there's a reason to change the stance of monetary policy now," Williams said. 

price distortions," MRB Partners argues, noting that evidence is still needed to show that monetary policy is tight enough to bring about

yields "have little upside from here and are expected to return to much lower 'normal' levels

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