Fed Governor Bowman Does Not Expect 2024 Rate Cuts

Rates rise slightly on hawkish Fed commentary and accelerating Canada inflation. Swap rates rose ~2bps across the curve after Fed Governor Michelle Bowman said that she sees upside risks to inflation, adding that she does not project rate cuts to ensue this year. Strong demand at a $69B 2y Treasury auction and a decline in US consumer confidence acted as offsets of Bowman’s comments. As a result, rates traded within a ~4bp range throughout the session. Meanwhile, NVDA bounced back today with a near 7% rally, though it remains well off its high of over $135 per share (reached on 6/18/24). 

Canada inflation unexpectedly soars in May. Canada consumer prices rose +2.9% year-over-year in May, significantly higher than the +2.6% estimate and tied for the highest level since December’s +3.4% growth. Meanwhile, the month-over-month figure (+0.6%) was tied for the highest level since April. The data comes ~3 weeks after the Bank of Canada reduced policy rates by 25bps, their first rate cut of the cycle. Futures now suggest a ~15% chance of another rate cut at the upcoming July policy meeting compared to over 61% as of yesterday.

Consumer confidence declines in June. The Conference Board’s measure of US consumer confidence declined from 102 in May to 100.4 in June, slightly above estimates of 100 but still the second lowest reading since last November. Conference Board chief economist Dana Peterson remarked that confidence remains supported by strong views about current labor market conditions, which outweigh a dimmer outlook. However, he noted that, “if material weaknesses in the labor market appear, confidence could weaken as the year progresses.”