Vim and Vigor
Bond yields rose in June as economic data continued to demonstrate more vigor than expected, particularly the 3rd revision of first quarter GDP. Combined with only sluggish declines in most inflation measures, this data provided the rationale for Fed Chair Powell to reiterate that more rate hikes will likely be needed to bring inflation into line. Finally, it seems the bond market is listening and now pricing in a greater likelihood of such a development. All of this led to a bit of a mixed bag: declines on most taxable bond indices — the total return for the Bloomberg U.S. Intermediate Aggregate Index was -0.60% — but a modest gain of 1.00% for the Bloomberg Municipal Index.
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