There are multiple “problems” (maybe not 99!) that are driving the bond market to price in such a different outcome than the Fed’s guidance. These include concerns about the debt ceiling, regional banking crisis, geopolitical tensions, concern about flagging U.S. growth, and optimism that inflation will continue to moderate.

The first week of May proved to be action-packed: another bank failed and was acquired out of receivership, the Federal Reserve met and raised interest rates, earnings continued to roll in, equity markets experienced renewed volatility after a lull, and economic data continued to be resilient “in spite of it all”.

Congress’s gridlock and battling is a lot like two bucks fighting. Most of the time the party disputes carry manageable market risks, but occasionally this gridlock has the potential to wreak havoc on the U.S. economy and financial markets.

Don’t fight the Fed. Fighting the flow of Fed-related liquidity is like trying to swim against a powerful river current: you can swim as hard as you can, but you will make little forward progress if the flow of the current is working against your efforts.