Summary and Trade:
- We think that the eight Fed eases priced for 2023-24 are unlikely. The 130bp rally in the 2Y sector since the SVB crisis is somewhat of an overreaction, due to fears of a repeat of 2008-type liquidity contagion.
- Instead, what there will be a slow bleed in the balance sheets of banks.
Summary and Trade:
- We think that the eight Fed eases priced for 2023-24 are unlikely. The 130bp rally in the 2Y sector since the SVB crisis is somewhat of an overreaction, due to fears of a repeat of 2008-type liquidity contagion.
- Instead, what there will be a slow bleed in the balance sheets of banks.
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