The Big Picture : Monthly Outlook

Rates are head lower

Us Macro

We expect 10y yields to push lower in June as the effects of Fed’s QT taper combined with weakening data gradually push the market into repricing Fed cuts back into the curve. Pce data for the month of May showed a marked softening in shelter related inflation helping the monthly core number come in at +0.2%, the lowest monthly reading so far this year.  While headline inflation rates remain above the Fed’s inflation target, we think the Fed will begin to focus much more towards its growth mandate citing softer data as a reason to begin cutting rates possibly as soon as its June meeting.