Slight Risk on Tone Ahead of FOMC Minutes

US stocks rallied while Treasuries sold off marginally as investors awaited this afternoon’s release of the March FOMC minutes.  Markets have recently been trying to interpret mixed messages from Fed officials, with Fed Chair Yellen providing a cautious/dovish tone in a speech last week, after several other regional Fed presidents had recently spoken out in support of a more hawkish/aggressive approach.  The minutes are expected to portray a shift in committee focus that places additional policy emphasis on international economic forces, which Yellen cited as posing the main risk to the US growth outlook.  Cleveland Fed President Mester (neutral, voter), St. Louis Fed President Bullard (Hawk, voter), and Dallas Fed President Kaplan (neutral, non-voter) are all scheduled to speak today, ahead of another public speaking appearance from Yellen (who will be joined by her living Fed Chair predecessors) in New York on Thursday.
 
Investors also responded to a rebound in oil prices, which rallied after Kuwait said a deal to freeze output between OPEC and other major oil producing countries could be reached without Iran.  Kuwait’s OPEC governor said “oil producers have no option but to freeze their production” in order to support prices which are “hurting everyone”.  She believes oil fundamentals will improve in the second half of this year, with prices trading between $45 and $60 a barrel.  A surprise decline in US crude stockpiles also added to the bullish sentiment. 

All three major US stock indexes are up between 0.50% and 1%, Treasury yields and swap rates are 2-4 bps higher across the curve, and WTI crude is rallying close to 5%.