A just-published report examined the ongoing panic in the major banking systems, and concluded that regulators will ultimately do whatever it takes to restore confidence in their banking systems. Moreover, the Fed and some other central banks have already tempered their hawkish rhetoric, which should help to calm nerves. Nevertheless, sentiment relating to banks is fragile and fears could linger for a while longer.
Although panic-stricken investors have rushed into government bond markets, the macro backdrop is still evolving in a bond-bearish fashion.
Net: if confidence in DM banking systems holds up, as we expect, then corporations are likely to stick to their upbeat Q2 hiring plans and a recession will (once again!) be avoided. Forward markets are discounting sizable policy rate cuts beyond the near run, which MRB does not expect to occur.