In rates markets, there is a tug-of-war between a slowing economy arguing for lower rates versus the structural forces putting upside pressures on inflation and rates (i.e., deglobalization, energy transition, more restrictions on immigration, more defense spending, and significant fiscal challenges).
So far, 10s have been moving around one-to-one with Fed expectations, see chart below. But in recent weeks, a gap has opened up, suggesting that other factors, perhaps including the fiscal outlook, are beginning to play a role for long rates.
Source: Bloomberg, Apollo Chief Economist. Note: The indices used from Bloomberg are MSM1UT Index and GT10 Govt.
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