MBS Live Recap: Market's Fear is Bigger Than The Fed's Appetite For Destruction

Market's Fear is Bigger Than The Fed's Appetite For Destruction

The Fed is on a mission to destroy demand for goods and services to a sufficient extent to push inflation back toward livable levels.  With only one rate hike up from the zero lower bound and the gigantic balance sheet of bonds yet to shrink, one could rightfully argue they've barely begun to destroy.  The market, on the other hand, is reading ahead in the script and acting preemptively.  Today's reaction to Brainard's comments (which she likely never imagined would tank the bond market back to multi-year yield highs) is the latest example.  Brainard said nothing new.  She merely flashed a Fed bazooka that has yet to be fired and financial markets spontaneously combusted.