Oil just had its biggest jump in months. Brent crude spiked 8% to $80/barrel after President Trump said the ceasefire with Iran is “done”, a sharp reversal following U.S. strikes on 80+ Iranian targets.
For fixed income investors, the transmission is direct: the 10-year Treasury yield rose to 4.598%, as markets price in the inflationary risk of sustained higher oil prices. Higher energy costs feed straight into CPI, and the Fed just can’t ignore that math.
Equities are feeling it too. The Dow dropped over 800 points (-1.56%), with the S&P 500 and Nasdaq each down ~0.94%, as investors consider whether this is the end to a rally that was already looking stretched.
Interestingly, gold fell nearly 3%, a reminder that correlations are up across asset classes and as a result,“flight to safety” isn’t always straightforward. Especially when inflation fears and geopolitical risk pull in different directions.
It will be interesting to see how Kevin Warsh and the Fed interprets this date and the the data we see before their next meeting. .
Sources: WSJ, FactSet, International Chamber of Shipping
#FixedIncome #Treasuries #BondMarket #Geopolitics #FederalReserve #Oil #Markets #Macro
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