Treasuries Teeter, Stocks in "Goldilocks" Zone

Treasuries are showing signs of being overextended, with a significant amount of issuance this week and pricing at the upper limit of expected cuts. Despite an initial rally, yields may back up, with swaps pricing indicating expectations for two rate cuts by year-end.
Fed Chair Powell's statement that a rate hike is "very unlikely" has reignited speculation about the timing and number of cuts, limiting downside for bonds. However, with 10-year Treasury yields below 4.50%, there is potential for rates to rise another 50 bps, particularly in the belly of the curve.
Equities have rebounded in the last few days as interest-sensitive two-year Treasuries rallied, with both rates and earnings acting as positive drivers. With rates capped and the economy showing resilience, equities are in a favorable position, creating a "Goldilocks" scenario for stocks.