What looked like the start of a panic move on Monday has gradually calmed down and the indexes will likely close the week at the same levels they were last Friday. The bond market, always the canary on the coal mine, has also normalized, and as you can see below, the whole curve has returned from its walk around recession-discounting levels, to a 4ish percent and an almost flat curve between the 2s and the 10s. It looks like someone forgot to hang the sign “this is a test” on Monday, and now that the drill has ended we can go back to worry about the Fed, inflation and unemployment. Perhaps this is the nudge the Fed needed to consider the first move in September, as a taste of what can happen when valuations are high, and the economy is slowing down as a consequence of restrictive monetary policy.
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