Rates Stay Near Neutral Ahead of Key Friday Data

Rates mixed after Fed commentary. Multiple Fed officials, including Susan Collins and Thomas Barkin, suggested today that monetary tightening will remain a necessity. The former said that she expects “some modest additional policy tightening, and then holding through the end of this year,” while the latter argued, “If inflation persists, we can react by raising rates further.” Despite the hawkish commentary, rates were mixed on the day, with the 2 and 10-year yields up 2bps and down 2bps, respectively. Elsewhere, equities continued their streak of gains, with the S&P 500 up 0.57% and the NASDAQ Composite up 0.73% on the day.

Previewing tomorrow’s PCE, personal income, and personal spending data. All eyes will be geared toward tomorrow’s data after quarterly core PCE came in slightly above expected today (4.4%). Estimates suggest that monthly core PCE will fall to 0.3% from 0.6% last month, which would be the first MoM decrease since November. Personal income and spending figures are also projected to come in well below last month’s levels, with personal spending the largest expected decrease to 0.3% from 1.8%. Soft figures would present an opportunity for the Fed to consider a lower Fed Funds target level, especially as banking sector instability has become a larger part of the conversation.

Day ahead. Personal income, personal spending, and PCE figures will be released at 8:30 AM ET. Fed voters John Williams and Lisa Cook will make public comments in the later stages of the session.