Powell to Meet with Congress

Rates fall ahead of Powell testimony. Swap rates and Treasury yields fell across the curve today, the 2-year UST yield falling ~3bps to 4.69% and the 10-year UST yield declining ~4bps to 3.72%. Hot housing starts and building permit data pushed rates higher in the early morning before rates grinded lower throughout the remainder of the session. Elsewhere, equities fell on the day, the DOW falling 0.71% and the S&P 500 declining 0.47%.

Powell’s first testimony to Congress since early March may be a tricky task. Tomorrow, Fed Chair Powell will make his first appearance on Capitol Hill since the banking crisis and the recent rate-pause decision. Powell will need to manage political hang-ups about current Fed policy on both sides of the aisle. In the wake of the recent hiking-pause, those on the right will need to be reassured that the Fed is committed to managing price pressures with further hikes, while also assuaging their concerns that further hiking will put more pressure on the banking sector. He will also need to address concerns from the left that further rate hikes may plunge the U.S. economy into a recession ahead of election season, and the employment impact of tighter policy which has been a key pain-point for high profile Democrats such as Senator Elizabeth Warren. Also expected are questions by lawmakers about more stringent regulations in the wake of recent banking collapses.  

Day ahead. Fed activity will be prevalent throughout, with Chair Powell’s testimony (10:00 AM EST) the highlight. Fed members Lisa Cook, Philip Jefferson, Loretta Mester, and Austan Goolsbee will also make public comments.