Canadian Hawkish Hike Sends Rates Higher

Hawkish hike from Bank of Canada pushes rates higher for second consecutive day. Swap rates and Treasury yields jumped higher once again today, this time on the back of a hawkish rate hike from the Bank of Canada. The central bank moved policy rates by 0.50% and indicated it could move rates by 75bps at its next meeting to “forcefully” combat inflation. While the sudden move doesn’t directly impact Fed policy, it does feel like a 3% Fed Funds rate in the U.S. by 2023 is back on the table.

ISM manufacturing rises unexpectedly. ISM’s various manufacturing indicators revealed a buoyant level of activity in the month of May, beating estimates that had called for a deceleration in growth. The data refutes recent calls for an economic slowdown in the U.S. and is yet another indicator that the economy remains in good health ahead of this week’s labor data. Tomorrow’s ADP report and Friday’s jobs report will be closely watched ahead of the Fed’s mid-June meeting.

Day ahead. Tomorrow’s ADP report will give markets a preview of what’s to come in Friday’s closely watched Jobs report. We’ll also get the latest look at initial jobless claims, durable goods orders and factory orders.