The past week was relatively devoid of high-impact data, and market direction was largely dictated by Mideast war news. The market’s pricing of the Fed, meanwhile, has shifted yet again and reversed some of its notable upward move of the past month; please see herein for more information. Essentially, the possible detrimental economic impacts of a prolonged conflict may now, at current yield levels, be serving as a counterweight to the inflationary impacts. The Mideast war should continue to be the dominant driver of markets, and it is an uncertain dynamic. Indeed, prediction markets, as of Thursday, price the odds of a ceasefire by the end of April at ~25% and by the end of June at ~59%. Subsequent to the monthly employment report released just prior to this Weekly Update hitting inboxes, the upcoming week will serve a slate of potentially impactful inflation data.

Back by popular demand, Frank Farone, Managing Director of Darling Consulting Group, returns to join us once again for an informative session focused on Liquidity and Asset/Liability Management. Frank will address key challenges and provide actionable strategies to help FHLBNY members stay resilient and take advantage of the new rate environment now and in the months/years to come.

We are now experiencing a “higher for longer” phase in the interest-rate cycle, accompanied by an inversion in the short-to medium terms followed by a steepening (see following chart). The Fed is still in a restrictive posture, but market expectations indicate a near-term easing, however, uncertainty surrounding the potential of future heightened growth leading to elevated inflation is causing steepening at the longer-end of the curve…