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Roth MKM argued on Wednesday afternoon that it believes in order for the Federal Reserve to step in and start cutting interest rates it would need to see clear directional changes in some of the recently hotter inflation reports. The financial institution also went on to note that it is more worried that data dependence track that the Fed is on will ultimately cause it to fall behind the neutral rate curve.
“We believe the Fed will eventually get around to lowering policy rates, but not until we have much softer labor market data and/or a reversal in the recent streak of hot inflation reports. In other words, not until there is a decisive move lower in the neutral policy rate,” Roth MKM’s Chief Economist & Market Strategist Michael Darda noted.
Looking at the CME Fed Watch tool, and investors will notice that the target rate probability for a Fed rate cut in June has diminished over the past month. Currently the probability of a June rate cut sits at 62.5% and 1-month ago that number was at 74%.
As rates remain in focus, so in turn does the bond market as the two interlink. As of Wednesday afternoon, the shorter end U.S. 2-Year Treasury yield (US2Y) sits at 4.68% and has advanced 43 basis points in 2024. At the same time the longer end U.S. 10-Year Treasury yield (US10Y) hovers at 4.36% and has moved up a total of 50 basis points this year.
For investors looking to further track the moves in yields and rates, they may look to further examine popular fixed income exchange traded funds as a proxy. Some funds to monitor include:
- Vanguard Total Bond Market ETF (NASDAQ:BND)
- iShares Core U.S. Aggregate Bond ETF (NYSEARCA:AGG)
- Vanguard Total International Bond ETF (BNDX)
- iShares 20+ Year Treasury Bond ETF (TLT)
- iShares 10-20 Year Treasury Bond ETF (TLH)
- iShares 7-10 Year Treasury Bond ETF (IEF)
- iShares 3-7 Year Treasury Bond ETF (IEI)
- iShares 1-3 Year Treasury Bond ETF (SHY)
Additionally, see how other yields trade across the entire yield curve here.
