The front end is doing the Fed's talking. The 2-year sits at 4.10% against a 3.75% funds rate — through policy on the wrong side. And the 3-month tape shows where the pressure lives: 2s are up ~35bp over the window, 5s +34bp, 10s +22bp, 30s just +10bp. The selloff is front-led. With headline CPI at 4.2% and core at 2.9%, the market isn't pricing cuts; it's pricing the possibility the next move is up.
Curve: know which window you're in. The six-month arc is a bear steepener — term premium repricing, 10s drifting to 4.49%, 30s to 4.98%. But the last three months bear flattened: front end rising faster than the long end, 2s10s compressing roughly 13bp. Translation: the long-end term premium move happened first; the front-end Fed-credibility move is happening now. Both legs of the thesis are on the screen, in sequence.
Oil is handing back, but the damage is booked. WTI 85.52, off ~2.4% pre-bell on US-Iran peace headlines. Crude is still +49% YTD, gasoline +78%. The disinflation from a peace deal is a forward story. The inflation in the pipeline is a backward fact — and it's why the 2-year won't come in.
Credit isn't blinking. IG broad 75bp OAS, high yield 280bp. No stress signal. The watch item is liquidity: the SpaceX debut prices today, and a trillion-dollar listing pulls real cash. Flow story, desk eye.
Pressure Gauge
Duration: 7 — front end above policy, CPI 4.2%, 3M selloff concentrated in 2s/5s
Curve: 6 — steepener on the 6M arc, front-led flattening in the 3M window
Supply: unscored — no auction calendar on screen
Basis/Credit: 3 — spreads quiet; SpaceX liquidity drain the only flag
Desk read: fade the peace-trade disinflation reflex at the front end. The 2-year is current-tense, not forward-tense.
Rich Petruzzo is a CFA charterholder. CFA® is a registered trademark of CFA Institute. The Dispatch is not affiliated with or endorsed by CFA Institute. Content is for informational purposes only and is not investment advice.