The market is struggling to read through mixed signals on inflation and growth in the US.

Today’s consumer confidence number plunged in a sign that retail won’t be as strong as believed. I also wonder if all the turmoil coming out of DOGE might normalize broad layoffs as well. That’s come alongside some threats around tariffs and climbing long-term inflation expectations (at a 30-year high).

The market is saying that the growth impulse will win out and the Fed will cut rates further. Two weeks ago, the market was pricing in just 40 bps of easing this year but that’s risen to 58 bps, with most of the move coming in the past 7 days.

Looking further out, the terminal low is now seen at 3.70% compared to 4.00% on January 24.

As for the next cut, the market is pricing in an 85% chance it comes on June 18 and a 27% chance it comes May 7.

Looking further out the curve, US 10s are at 4.29% from a high of 4.80% in the second week of January.