Fed Cut Odds Halved: Treasuries Sell Off & Quality Credit Wins

Rate expectations are shifting fast — and fixed income markets are forcing portfolio managers to act. With September Fed cut odds collapsing from 50% to one-third in a single week, the "higher for longer" narrative is no longer a tail risk. It's the base case.In today's episode, Gianluca breaks down the sharp sell-off in longer-dated U.S. Treasuries, driven by resilient services and labor data keeping core inflation sticky. Macro and systematic funds are already cutting duration and piling into curve-steepener trades. Across the Atlantic, the ECB's post-cut guidance disappointed bulls — futures now price fewer than two additional cuts over 12 months, pushing asset managers toward high-quality euro IG credit and select long-dated sovereigns.Meanwhile, May's bond market performance told a clear story: long-duration, investment-grade corporate bonds outperformed. Institutional flows confirm it — quality carry, barbell structures, and BB-and-above high yield are where sophisticated allocators are concentrating risk today.Subscribe to Hedgebra wherever you listen to podcasts, follow us on LinkedIn, and explore our research at hedgebra.com.