Axonic Capital on CNBC: What the Latest Inflation Data Means for Investors

Aug 15, 2022 | In the News

Stocks experienced yet another volatile day following the latest inflation data, indicating that the U.S. Federal Reserve will likely need to raise interest rates in the near future. Despite this, the 10-year yield also dropped today due to investors purchasing bonds, which is not typically seen following a pessimistic inflation report. What might this all mean for investors? CNBC again turned to Axonic Capital Director of Research Peter Cecchini for insight.

“Interestingly enough, my view is that 10-year yields were going to be capped because of what we are seeing here,” Cecchini tells viewers. “When equities sell-off, normally speaking and in the absence of a Fed taper, you would have a flight of capital into safety. I think we are going to get a very similar dynamic on a go-forward basis.”

Cecchini continues saying that he does not believe that the Fed will increase rates by 3 percent, which is the terminal rate that most of the big banks are concerned about, because of corrections in the equity market. “That equity tightening is going to do most of the Fed’s work for it, which is going to force it to pivot, especially if we get an inversion of the yield curve,” he explains. “That inverted yield curve is going to send a signal to the Fed that it needs to slow the hikes.”

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