Rates Climb Higher in Slightly Less Volatile Session

Rates rise after data beats, hawkish commentary. Swap rates and Treasury yields rose across a flattening curve today, fueled partially by beats in wholesale and retail inventories, consumer confidence, and the Richmond Fed Manufacturing Index. Hawkish commentary from St. Louis Fed President James Bullard pushed yields higher as well, as he stated that “monetary policy can continue to put downward pressure on inflation” while “appropriate macroprudential policy can contain financial stress.” The policy sensitive 2-year yield climbed over 8bps to 4.08%, while the 10-year yield rose only 4bps to 3.57%.

Fed Vice Chair Barr makes first congressional appearance. Fed member Michael Barr, who testified before congress today in the first of two sessions, said that he anticipates “the need to strengthen capital and liquidity standards for firms over $100 billion” when asked if the failures of SVB and Signature Bank could put banking sector regulation changes into play. Barr added that the Fed has yet to make any conclusions on specific changes to come, as they continue to weigh whether SVB’s collapse should ignite changes for the broader sector. The comments were particularly important given that the Fed loosened requirements imposed on banks between $100bn-$250bn in assets in 2018-2019, which released financial institutions (such as SVB) from some requirements that were imposed following the 2008 crisis. Barr suggested that these loosened requirements were not the cause of SVB’s downfall, arguing that the bank’s demise was a story of “bank mismanagement.” 

Day ahead. Fed Vice Chair Barr’s testimony will continue at 10 AM ET. Mortgage rate and pending home sales data will be released early in the session, which will be followed by crude oil and gasoline figures shortly thereafter.