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Fedspeak Back in Force as Rates Hit Quarterly Highs

Swap rates and yields climb and hit multi-month highs. Swap rates and Treasury yields rose across the curve today, extending last week’s trend. The 2-year yield climbed another 5bps to 4.32% while the 10-year yield reached 3.71%, a level not seen since mid-March. The moves came alongside Fed commentary which dominated the session’s activity, and ahead of a meeting between House Speaker McCarthy and President Biden at 5:30 PM. Elsewhere, equities were mixed on the day, the DOW falling 0.42% while the NASDAQ jumped 0.50% higher.    

Fed presidents are closely monitoring the impact of credit tightening and inflation. St. Louis Fed President Bullard said today he thinks the Fed should hike interest rates two more times this year while San Francisco Fed President Daly remains data dependent and is waiting to see the impact of credit tightening on the general economic outlook. Minneapolis Fed President Kashkari says it’s a “close call” whether the FOMC hikes or pauses next month, in a continuation of last week’s mixed signals from Fed officials.

Day ahead. Fed voter Lorie Logan will lead the session with comments at 9 AM. PMI data will be released at 9:45 AM, which will be followed by new home sales and manufacturing figures shortly thereafter.

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