Market Outlook - The market is currently in a CapEx bubble, expected to burst naturally at some point [1] - The current selloff is considered mild, with potential for further continuation [2] - Expectation of a more volatile stage in the market, possibly entering now [3] - The cycle is quicker and less volatile compared to the dotcom bubble [3] Dollar and US Assets - The dollar is expected to strengthen into year-end, but not parabolically [5][9] - Potential upside for yields amid uncertainty about the Fed's next move [5][6] - Extreme risk aversion could lead to a short-term dollar boost from deleveraging [7] - US stock market bounce will support the dollar due to inflows [8] Bond and Equity Market Dynamics - Equity traders are currently leading fixed income traders in this cycle [10][11] - Equity traders believe the bubble hasn't burst yet, so stocks lead fixed income for now [11]

Take a look at Treasury yields right now. Look at the 10-year. Look at the 10-year. 4.1%, the 2-year, 3.6%.People are not totally rattled. Uh, joining us right now, uh, Kelsey Burrow, fixed income portfolio manager at JP Morgan Asset Management. Are you surprised, by the way, that the bond market has not been more rattled by just everything.>> I'm not too surprised. You know, I think that we I there's been a fair bit of data even though there's been a lack of official data with the government shut down. Um ...

Political Impact - Rachel Reeves' first budget led to her being Britain's most unpopular chancellor in decades [1] - She hopes her second budget will gain favor with the bond market [1]

Interest Rate Outlook - The bond market previously indicated that cutting interest rates was a mistake [1] - The market is currently pricing in two more interest rate cuts for the remainder of the year [1] - Future interest rate cut decisions will depend on the composition of the committee at that time [3] Economic Projections - Current market expectations align with the median projection from the committee's last summary of economic projections [2] - There is less disagreement within the committee regarding interest rate cuts for the next year compared to this year [3]

Understanding the bond market basket case. https://t.co/wVBxymj4tU ...

Fixed Income Market Overview - Investors should consider a new approach to investing in today's bond market [1] - The bond market is entering a new era [1] Investment Strategy - Investors should be thinking about investing in today's bond market [1]

Government Shutdown & Fiscal Policy - The White House is considering across-the-board layoffs, potentially using the government shutdown as an excuse [1] - The current economic fragility amplifies the impact of government shutdowns [2] - The Republican Party's commitment to shrinking the federal government is questionable, given deferred resignations [3] - The administration's threats of mass firings may be limited by civil service reforms enacted 130 years ago [4][5] Trade & Tariffs - The President has allegedly made several undocumented trade deals with major countries, relying on press releases rather than formal agreements [7] - The Court of International Trade and the D C District Court have challenged the President's authority to impose tariffs [8] - The Supreme Court will hear a case on November 5th that could potentially dismantle the current tariff regime [8] - The bond market's reaction to tariff news has shifted from inflation concerns to deficit reduction needs [10] Deficit & Debt - In 2025, the US is projected to run a $17 trillion deficit, approximately 6% of GDP [11] - Tariffs are claimed to generate $300 billion in revenue in 2026, potentially offsetting tax cuts, but not closing the deficit significantly [12] - The current level of debt is sustainable, but the ongoing deficits are not [13]

Political Analysis - Labour's Keir Starmer's best defense against Andy Burnham may be the bond market [1] Economic Context - The bond market is a key factor in the political landscape [1]

Monetary Policy - The Bank of England is expected to curb its quantitative tightening program [1] - Concerns exist that gilt sales are exacerbating bond market volatility [1]

Fed Policy & Interest Rates - The market anticipates a 25 basis point rate cut, but there may be three Fed voters dissenting, potentially advocating for a 50 basis point cut [1] - The market will closely monitor the Fed's summary of economic projections, particularly the dot plot, to gauge the expected policy rate for the current and subsequent years [2] - The market is pricing in nearly 150 basis points of cuts for the next year, expecting the Fed to go below 3%, which may be difficult for the Fed to indicate [3] - The market expects the Fed to cut rates drastically, anticipating a new Fed chair next year to aggressively save the cycle and prolong the expansion [11][12] Bond Market Dynamics - The president's influence on the Fed is priced into the term premium, which is the value in extending out the bond curve [4] - Forward rates indicate that the market expects 10-year Treasury yields to be close to 550 basis points (55%) in 10 years, the highest in over 20 years [5] - The market may be pricing in too much term premium, as 550 basis points (55%) growth for the next 20 years is unlikely [6] - The market is already pricing in the Fed getting back to its 2% inflation target [13] Economic Conditions & Inflation - The economy is showing a two-speed dynamic, with high-income consumers continuing to spend, making the inflation story tricky [8] - Core inflation, excluding shelter, grew at 270 basis points (27%) last month, the highest level in the last two years, indicating high-income consumers are doing well [9] - Small businesses are suffering due to high interest rates, leading to firing and a higher unemployment rate [9] - Tariff policies and immigration could lead to stagflationary conditions, with lower growth and higher inflation [14]