This is the week the Fed changes hands. Kevin Warsh takes over a central bank that just held the funds rate at 3.50%–3.75%, a 10-year sitting around 4.30%, oil pressing back above $107, and a credit market still pricing as if none of that matters. Markets are no longer betting on another rate cut in 2026. They are starting to price the chair. CNBC + 3
Where rates are. The 2s/10s curve sits with the 2-year near 3.78% and the 10-year near 4.30%. The bid is in the front end and the duration is being sold. That is consistent with a market that thinks Warsh will not deliver the cuts consensus was leaning on six weeks ago — and any inflation surprise this week reinforces. CNBC
Where credit is. Investment grade and high yield spreads are still inside their multi-decade lows. Investors have not been paid significantly more for taking on additional risk in bonds beyond the risk-free Treasury rate. They are being paid for the absence of an event. Last week's tape: PIMCO, Janus Henderson, and Baird Asset Management captured the inflows from private credit refugees looking for daily liquidity at a transparent mark. Saba Capital printed the NAV gap. The bond market is not predicting anything — it is pricing what is already in motion. CNBC
Where oil is. WTI back above $107 with the Middle East still the live tape. Until that pressure releases, every CPI print carries an energy component the Fed cannot solve with policy.
The Calendar
Tuesday — April CPI. Consensus 0.6% headline MoM, 3.7% YoY; core 0.3% MoM, 2.7% YoY. Energy keeps headline higher; core impacted by one-off adjustments to rent. Core is the test — Warsh inherits an inflation problem if it ticks higher again. Kiplinger
Wednesday — April PPI. Pipeline pressure read. Watch core services.
Thursday — Retail Sales, Initial Claims, Import/Export Prices. Consumer read against rising gas. Claims remain the cleanest real-time labor signal.
Friday — Empire State, Industrial Production, Michigan Consumer (prelim). Sentiment held at record-low levels in April. The 1-yr inflation expectation will draw the Fed's eye. CNBC
The Risk Bias
Constructive on the front end. Cautious on duration into Tuesday's print. Cautious on credit at these spreads in any week with this much event risk on the calendar.
The Standing Thesis
Consensus reads Warsh as a Trump-aligned dove. He is a balance sheet hawk. Tuesday's CPI is the first data point on his desk. Anyone who thinks he steps in cutting is reading the wrong piece of his record. Watch the long end if core surprises above 0.3% — that is where the market re-prices the chair, not in fed funds futures.
The bond market is not waiting for next week's headlines. It is already positioned for the next two quarters. The question for the week is whether the data lets it stay positioned.
Educational and macro commentary only. Not investment advice.
The Bond Bro dispatch.thebondbro.com · thebondbro.substack.com