Wall Street's bet on a Fed rate cut by September is all wrong, says inventor of bond market volatility gauge

How high will rates go to battle inflation is one question investors hope to get answers to when Fed Chairman Jerome Powell makes a Capitol Hill appearance on Tuesday.

No matter what the Fed chief has to say this week, the market has one idea stuck in its brain right now, and it’s all wrong, says our call of the day from volatility expert Harley Bassman. Investors have been particularly rushing out of 10-year Treasurys bonds TMUBMUSD10Y , based on fears sticky inflation will cause higher Fed rates at least in the short term. That has pushed yields higher — to above 4% last week —amid an ongoing yield curve inversion — when short-term interest rates exceed long-term ones.

So what should investors do about Wall Street’s wrong-way bet? The money manager sees an opportunity via the current shape of the yield curve. For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

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