Rates Volatile to Start November, DJIA Crosses 36,000

Rates kick off November with another volatile session as DJIA crosses 36K for the first time. Equities closed on another record high as  strong  corporate earnings continued to outweigh fears around supply chain disruptions and inflation. Swap rates increased across the curve but rates at the short-end continued to see the biggest moves as investors price in a mid-2022 rate hike. 2 and 3-year rates are now at YTD highs, but haven’t been accompanied by a corresponding sell-off on the long-end- suggesting the market is becoming more concerned with long-term growth. The spread between the 2-year and 10-year U.S. Treasury yield has contracted 16 bps since the beginning of October.

Senator Joe Manchin pushes back on social spending bill, citing potential effects on inflation and debt. Senator Manchin is the pivotal vote for democrats on the $1.75T social spending bill which some had hoped would be brought to a vote as early as tomorrow. In addition to pushing for greater clarity around the contents of the spending bill, Manchin urged the House to vote and pass the separate bipartisan infrastructure bill, which had been delayed as lawmakers negotiated the contents of the larger spending bill.

FOMC meeting begins tomorrow. The FOMC begins its two-day meeting tomorrow which will culminate in a rate announcement and subsequent press conference on Wednesday. The Fed is largely expected to announce a taper of its asset purchase program, which comes on the tails of several other taper and rate hike announcements in Canada, Australia and Brazil. Fed Funds futures currently imply a Fed rate hike in July of 2022.