Traders wait for calm to shatter with Fed ‘breaking stuff’

Despite recent market calm, bond traders believe the tranquillity is unlikely to last during May and June as the Fed is expected to increase interest rates. There are also political fears over the government’s potential non-resolution of the debt limit until it is close to default. Furthermore, banks are expected to temper their lending projects to reinforce investor confidence. In spite of this nervousness, predictions for the US economy are seen as relatively resilient, with inflation slow to subside from its 2% target and the personal-consumption expenditures index on track to lift moderately.

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