Central bank watcher: Delta hedging

The surge in Delta variant cases has dealt a blow to the full-economic-reopening story. Meanwhile, the Fed has signaled a lower acceptance of inflation. The surge in Delta variant cases has dealt a blow to the full-economic-reopening story. The consequent hedging against downside risks has occurred against a backdrop of crowded short-duration positions, and a lower acceptance of inflation by the Fed, thus prompting a sharp rally in global long-term rates.