For Fans of Data, This Week Delivers

After the initial recovery from the Great Financial Crisis, and again after the Fed began to taper asset purchases at the end of 2013, there were two dark ages for the role of economic data. These both lasted for years and involved low levels of correlation between data and market movement. Another dark age followed the outbreak of the pandemic.

In all cases, the dark ages were caused by a predictable policy stance from the Fed with a stable outlook well into the near-term future. In all cases, data reconnected with markets when the Fed's policy stance was in flux, as has increasingly been the case as we approach the terminal rate.

In simpler terms, the connection between econ data and the bond market has been growing stronger and stronger in 2023 as the Fed comes out of cruise control on rate hikes.  Last week's hike represents the best chance yet that we've hit the terminal rate.  Whether or not that chance is "high" in outright terms will depend on data between now and the next Fed meeting. 

This week contains a meaningful portion of the most relevant data.  If it's unified in one direction or the other, bonds are capable of some large, fast movement.  In terms of 10yr yields, nothing inside a range of 3.75 to to 4.15 would be a surprise.  Mixed data would likely result in a much calmer performance.