Choppiness Continues as Rates Follow Equities Lower

Big risk-off move finally pulls rates lower. A dramatic risk-off move across equities and commodities gave Treasurys a significant bid today, pulling the 10-year Treasury yield lower by nearly 10 basis points  on the session. The front end of the curve saw the greatest impact, 2-year rates falling over 15 bps on the session, though the market continues to price in a 100% probability of a 50bp hike at the next FOMC meeting in June. US equities endured one of their worst days in several years, the Nasdaq Composite falling over 4%.

Fed’s Bostic says 50bp hikes sufficient. Atlanta Fed President Raphael Bostic became the latest Fed official to say that the central bank does not need to hike by more than 50 basis points to contain inflation. Market participants had begun to speculate that the FOMC could opt for the shock and awe of a 75 bp hike if prices continued to accelerate. Bostic added that he sees signs that “on a month-to-month basis, we are not continuing to see an acceleration” in prices.

Day ahead. Several Fed speakers will make comments tomorrow, including Williams, Bostic, Kashkari, Waller and Mester. On the data front we’ll get the latest NFIB business optimism index and the change in crude oil inventories.