It's a testing time in broader markets as the slew of poor US data this week appears to be taking a toll on overall sentiment. 10-year Treasury yields fell to its lowest since September last year in trading yesterday, before keeping near 3.30% still for now. The pressure is certainly on as the key threshold is being challenged.
As Fed rates pricing starts to run towards a point where markets are viewing a peak, it is about time that we are starting to see traders and investors gauge how the economy will take to the tightening cycle.
Will we see a soft landing or a hard landing? That is a big question that needs to be answered now.
And as we try to figure that out, we are slowly transitioning away from the narrative that bad news is good news, and instead moving back towards the narrative that bad news is indeed bad news.
There's still a fine balance to be struck as the Fed may not be done with rate hikes but you get the picture.
If economic conditions start to get hit hard as the weight of the Fed's rate hikes is being felt strongly, that might convince markets that the imminent slowdown could grow into a more worrying downturn.
The anxious mood is certainly reflected in stocks faltering yesterday while falling Treasury yields is another classic sign that we are headed towards a more risk-on vs risk-off debate mostly in the coming months.
