Leverage finance markets are near frozen.

Only two junk bonds have priced in May in the U.S high-yield bond market.

There are no deals currently in the pipeline, per institutional clients in our live chat on Bloomberg.

Just Three 25bps Rate Hikes have Delivered a lot of Stress

The Fed intends to aggressively normalize monetary policy, with simultaneous rate hikes and an ambitious balance sheet runoff schedule. The goal of the Fed is to dispel the growing belief in the markets that the Fed is behind the curve and inflation is becoming anchored in the economy.

We believe that the Fed can maintain this aggressive pace of QT only for a very short period.

We base this on the shadow Fed Funds rate, which incorporates both QE and interest rates, and the most recent experience with QT in 2018. In that period, the Fed could only maintain full-on QT (rate hikes + balance sheet runoff) for one quarter before it had to reverse course.