The bond market is already hiking rates as Kevin Warsh takes over as Fed’s new chair
“This is the modern bond vigilante,” said Ahn. “They don’t burn down the Fed’s credibility with one yield spike. They starve its optionality by lifting the entire curve above the policy band.” There has long been a perception that new Fed chairs are swiftly tested by turmoil in markets shortly after taking the reins, according to Deutsche Bank’s Jim Reid, who noted the actual data on the topic has been mixed.
The Bond Vigilantes awaken!
Even with the rising rates on USTs though, I don't see much likelihood that Inflation will respond and cool anytime too soon. Input prices for manufacturers aren't going down until Hormuz is at least partially settled and demand destruction in Food and Energy takes a while because the consumption is generally fairly inelastic. However, more flexible areas of the economy like vacation travel and clothing purchases will take an immediate hit that will depress the labor market. So, recession & stagflation likely to take hold in the 3rd or 4th quarter.
Kevin can't do much about this, but he is guaranteed to be Chump's Whipping Boy. Since His Trumpness theoretically can't fire him, it will be interesting to see how he holds up under regular abuse on social media. You couldn't pay me enough for that job.
RE