The “higher for longer” theme appears to be sinking in as interest rates moved sharply northward on sticky inflationary readings, a slightly hawkish Federal Reserve (the Fed), and fiscal imbalances. Market participants finally took the Fed at their word, or at least their projections, as the 50bp shift in 2024 and 2025 federal funds rates unnerved both stock and bond investors. Simply put, it appears as though the cost of financing will be higher for longer, and that is certainly not a path to easy profits, especially for those businesses that rely heavily on borrowing. The short-end of the curve remained relatively steady, with rates rising approximately 15bps on the 2-year Treasury moving from 4.90% to 5.04%, while rates further out the curve tilted much higher as the 10-year moved over 70bps to close at 4.57% and the 30year benchmark closing at 4.70%, about 84bps higher.
Read the full report below for more information on Fixed Income, Credit Spreads, The Economy, The Fed, and our Investment Strategy going into the final quarter of 2023.