What's behind the bid in the front end of the Treasury curve

<p>The bid in the front end is incredible today.</p><p>Perhaps that's a rejection of worries about high inflation and further bets on aggressive Fed rate cuts (Dec 2024 pricing up to 151 bps).</p><p>Another theory is that bombs are about to start falling in the Middle East. There is a report in the UK that Sunak is meeting with his cabinet right now to authorize a US/UK action. I don't think that's really going to be a big deal but the rule of unintended consequences always applies when it comes to war and there are people who would argue that the Houthis are extremely battle-hardened.</p><p>The question is: If it's geopolitical risk, why are stocks rallying? To that, I might argue that the equity market is usually the last to know and is simply reacting to the bond market (or interpreting fighting as another reason for the Fed to cut).</p>

This article was written by Adam Button at www.forexlive.com.