Short-Term Swap Rates Rise 7bps Ahead of Busy Week

Rates rise ahead of labor data, Powell testimony. The swap and yield curve bear flattened today as short-term rates rose ~7bps while the long end climbed only 2-3bps. Hawkish commentary from Atlanta Fed President Bostic contributed as markets look forward to Chair Powell’s testimony, where he is expected to reaffirm that the Fed must be patient with their rate cute timeline. Elsewhere, equities dropped slightly after the past few months of relentless gains, while cryptocurrencies continued to soar. 

Super Tuesday will likely decide the GOP nominee. Tomorrow is Super Tuesday, the day when 16 states and one US territory will vote in Democratic and Republican primaries. The results will likely reflect the ultimate outcome; since 1988, the winner on Super Tuesday has ended up being their party’s presidential nominee. In a new development this cycle, California will join the list of Super Tuesday states, the largest US state with the most primary delegates up for grabs. Heading into the elections, FiveThirtyEight’s national polling average indicates former President Trump is the clear GOP favorite at ~77% vs former Governor Haley’s ~15%.

Bostic says no rate cuts until Q3. While markets remain split between June and July for the first US rate cut, Fed President Bostic expects and is targeting Q3. He added that the Fed should pause after the initial rate cut and stated, “Given the uncertainty, I think there is some appeal to acting and then seeing how participants in the markets, business leaders and families respond to that.” Separately, he noted his preference for the Fed to continue its pace of quantitative tightening “for as long as possible.”