Yields soar on surprisingly hawkish FOMC. Treasury yields climbed this morning on reports that the US remains firm on maintaining its naval blockade until Iran agrees to a peace agreement that addresses its nuclear program. Yields continued to rise despite the FOMC voting to keep policy rates unchanged, as three hawkish officials dissented. Treasury yields ultimately closed 7-11 bps higher across the curve and are at or within 5 bps of YTD highs, with the 2-year yield at 3.95% and the 10-year yield at 4.43%. Meanwhile, equities closed nearly unchanged today, with the S&P 500 and NASDAQ closing 0.04% lower and 0.04% higher, respectively.
FOMC votes to hold rates steady with four dissents. Fed officials left policy rates unchanged today at a range of 3.5% to 3.75% in a divided vote. Four officials dissented (for the first time since 1992), including Miran’s vote for a 25 bp rate cut and objections from Hammack, Kashkari, and Logan of FOMC statement language that hinted at resumed rate cuts in the future. The post-meeting statement ultimately highlighted elevated inflation, in part due to “the recent increase in global energy prices,” and the “high level of uncertainty about the economic outlook” from the war in Iran as drivers of today’s decision. The full FOMC statement with a side-by-side comparison from the last meeting can be read here.
Powell to remain on board, says Trump has “left me no choice.” In his last post-meeting press conference as Fed Chair, Powell said that he would stay on as a central bank governor. Powell said that he had “long planned to be retiring,” but that “the things that have happened really in the last three months have… left me no choice but to stay until I see them through at least that long.” Powell’s chairmanship ends on May 15, though his term as a Fed governor runs until 2028. The announcement comes on the same day that the Senate Banking Committee voted to advance Fed chair nominee Kevin Warsh’s confirmation to a full chamber vote.