Megan in some respect people are saying look we may have actually peaked in inflation expectations in particular and
maybe an overall inflation. How do you position for that. Yeah I think that's a good point. You know while we may have
peaked certainly in terms of some of these core year over year reading the question is really going to be when will the Fed
ultimately need to pivot and sound more dovish on the second part of their mandate particularly unemployment.
We think that they're they've already begun to show signs that they're considering this from their their recent commentary over
the past couple weeks or so. And specifically what we're hearing from the minute that they're going to be watching how the in the
unemployment picture is evolving as they deliver these hikes. And we think that where inflation ultimately settles when they
pause is a really important thing here. Okay. And it's a really interesting mix isn't it. The fact we have such we have this
really high inflation we have really low unemployment. And yet everyone's so nervous about the state of the economy. Megan I
mean if we're waiting for inflation so if we're waiting for unemployment to turn we might be waiting quite a long time. Does
that give the Fed scope to hike for quite a quite a quite a duration.
Yeah. We think that they're going to deliver at least two more 50 basis point rate hike but September is going to be an
important part here. We think that we may be seeing the bottoming in those weekly jobless claims numbers which is
something that they're going to have their eye on. Over the past few weeks we've definitely seen the market refocus a bit here on
those downside risk coming out of the earnings releases that we've been hearing which gives us some guidance to basically say
here that with the market pricing a path that seems pretty consistent with what the Fed has in mind. No peeking. Perhaps at
around three and a half percent or so the cycle that's doing its job and tightening financial conditions. Has the bond market
accurately reflected the possibility of this pause. I think probably not. You know while we think a pause is likely
in September that's not necessarily our base case here. But we think that there could be slowing from the 50 basis point
increments that they have been delivering to something more like 25 basis points. And again consider the effects that they're
already having on financial conditions and being very actively monitoring what we're going to be seeing in the labor market
again. You know on the back of some of these pressures that we've seen already reported in the earnings releases.
Yeah. Give us a bit more. On where you think the so the 10 year Treasury for example at the end of this year we were speaking.
We'll just listen in to a clip of the conversation. We were speaking to Steve Major from HSBC a little bit earlier on and he
was painting a picture of something that's quite complex dependent very much on on where the Fed goes. You could get to
two very different end of year yields on 10 year treasuries. Let's listen.
If they hike with their eyes closed and they carry on doing it into next year then the 10 year treasury should be 4 percent
right. If if they take into account that we could have a recession by 2024 they're gonna be back at zero within the next
year or so. Therefore the yield should be below 1 percent. So maybe even just getting to the point there that dependent on
what you think the Fed is going to. How you think the Fed is going to treat fears of slowdown in the global economy and the
U.S. economy. You can get two very different conclusions for the end of the year as to whether 10 year yield is anything between
four and less than one percent. Where would you sit on that on that spectrum. Yeah I think that's absolutely correct. You know
where we're sitting right now is that we think that we've probably already seen the peak and 10 year old. And this is
because the market is already showing some signs of stress here. What's the first thing that investors do when they're worried
about the economy will by risk free access and that's treasuries. So we think that we're probably going to see a
continued decline in back end Treasury rates particularly the very long end of the curve 30 year. You know as as we continue
to see you know pressures and uncertainty around the economic picture here and again increasing strength around the
stagflation scenario.