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Breaking Point?

April 2023 Economic Review

The collapse of Silicon Valley Bank, a unique regional bank that experienced a significant deterioration of its depository base, weighs heavily on the market. There is an adage that the Federal Reserve will often raise rates “until something breaks.” With regional banks now firmly under the microscope, the implications of a credit crunch stemming from a tightening of lending standards have led many market participants to believe that the Fed’s battle against inflation is nearly complete.

While some Fed officials have publicly dialed back expectations for future rate hikes, continued tightness in the labor market with inflation that is still too hot for comfort may make it difficult to come to a consensus. However, Fed officials did agree at their March meeting that “some additional policy firming may be appropriate” while raising the Fed Funds target rate to a range of 4.75% – 5.00%.

Due to the long and variable lag between monetary policy and its impact on the economy, there are growing concerns that the Fed will keep rates too high for too long, tipping the economy into a deep recession. The disconnect between the Fed and market is visible when analyzing the yield curve. While the Fed is forecasting its target rate to be well above 5.00% by year-end, the market is pricing in rate cuts, with a year-end target closer to 4.50%. At some point it may be prudent for the Fed to pause and assess the situation, but as recent events have attested, whether it gets that chance remains to be seen.

Current Economic Releases
Data Period Value
GDP QoQ Q4 ’22 2.60%
US Unemployment Mar ’23 3.50%
ISM Manufacturing Mar ’23 46.3
PPI YoY Mar ’22 3.20%
CPI YoY Mar ’23 5.00%
Fed Funds Target Mar 22, 2023 4.75% – 5.00%
Treasury Yields
Maturity 4/13/23 3/13/23 CHANGE
3-Month 4.873% 4.765% 0.108%
6-Month 4.923% 4.613% 0.311%
1-Year 4.632% 4.147% 0.486%
2-Year 3.968% 3.976% -0.008%
3-Year 3.703% 3.868% -0.165%
5-Year 3.500% 3.699% -0.199%
10-Year 3.445% 3.573% -0.128%
30-Year 3.687% 3.709% -0.022%
Agency Yields 
Maturity 4/13/23 3/13/23 CHANGE
3-Month 5.028% 4.922% 0.106%
6-Month 4.927% 4.821% 0.106%
1-Year 4.704% 4.639% 0.065%
2-Year 4.177% 4.217% -0.040%
3-Year 3.886% 3.983% -0.096%
5-Year 3.670% 3.798% -0.128%
Commercial Paper (A1/P1)  
Maturity 4/13/23 3/13/23 CHANGE
1-Month 4.910% 4.700% 0.210%
3-Month 5.160% 4.890% 0.270%
6-Month 5.280% 5.020% 0.260%
9-Month 5.210% 5.050% 0.160%


Source: Bloomberg. Data as of April 13, 2023. Data unaudited. Many factors affect performance including changes in market conditions and interest rates and in response to other economic, political, or financial developments. Investment involves risk including the possible loss of principal. No assurance can be given that the performance objectives of a given strategy will be achieved. All comments and discussions presented are purely based on opinion and assumptions, not fact. These assumptions may or may not be correct based on foreseen and unforeseen events. The information presented should not be used in making any investment decisions. This material is not a recommendation to buy, sell, implement, or change any securities or investment strategy, function, or process. Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and/or investment decision may incur losses.