The bond market is standing in front of the whack-a-mole game with only 2 holes. On one side is the mini banking crisis. On the other side is inflation. After spending the first half of the week generally transfixed by First Republic's various issues, the other mole is popping up this morning. The inflation components in the GDP data suggest the other upcoming inflation reports could be a bit higher than forecast. That has the bond market reassessing its stance and pricing in lower odds of rate cuts by the end of the year.
Meanwhile, the First Republic mole is preparing to pop out again--possibly to add its name to the list of recent bank failures. The bond market is going to need another mallet in that case.