Daily Market Color July 26, 202210yr Yield Drops Ahead of FOMC Announcement Up and down session ends with rates little changed ahead of Fed. Swap rates and Treasury yields initially fell by as much as 10 bps as a risk-off mood gripped markets in the aftermath of Walmart’s profit warning and commentary on the health (or lack thereof) of the American consumer. The sentiment wasn’t helped by soft housing price data or the biggest monthly drop in new home sales in several months. That said, rates would grind higher throughout the afternoon session and ultimately ended the day with little changed. The 10-year Treasury yield inched higher to close at 2.81%. Previewing the Fed’s decision. The Fed is broadly expected to deliver the largest single back-to-back rate hike in many decades tomorrow as the FOMC continues to fight record high inflation. While a 75bp rate hike will get all the headlines, of greater concern to markets will be any softening of the Fed’s language around its objectives, particularly in light of recent data that suggests the economy may be decelerating. If Fed Chair Powell stays the course and continues to emphasize the Fed’s inflation objective above all else, then we may see the front end of the curve shift higher and off recent lows. The Fed’s rate decision and ensuing press conference will occur at 2 pm ET. Day ahead. Kicking off the day will be the MBA’s latest data on mortgage applications. We’ll also get information on retail and wholesale inventories, which have taken on increased importance in this inflationary environment. Durable goods orders for the month of June will round the day out ahead of the FOMC decision.