Daily Market Color

Swap Rates Hit 2024 Highs

Swap rates rise to 2024 highs ahead of this week’s policy meetings. Swap rates are set for a busy week as the Fed, BOE, and BOJ prepare to announce policy decisions, though only the BOJ is expected to change their policy rate. Swap rates rose slightly ahead of the BOJ’s announcement tomorrow, with most rates now at their 2024 highs after last week’s elevated inflation data. Rates are 40-60bps higher from their 2024 lows, and the 2-year UST yield is only ~27bps away from 5%. Elsewhere, equities and the “Magnificent 7” rallied, as the S&P 500 and NASDAQ climbed by 0.63% and 0.82%, respectively.

Bank of Japan (BOJ) expected to end Yield Curve Control (YCC) tomorrow. An unnamed sourced notified Nikkei Asia, a Japan-based news outlet, that the BOJ “is poised to decide to end its yield curve control and purchases of risk assets as well as call time on negative interest rates…” at today’s monetary policy meeting. This would mark the first time in nearly 17 years that the BOJ has hiked rates and would be a reversal of the Yield Curve Control (YCC) policy framework enacted in 2016. Last week’s negotiated wage hikes exceeded expectations and were likely an important driver of tomorrow’s expected decision, since wage growth is a key part of sustainably achieving 2% inflation levels. The Yen briefly strengthened following the news but reversed gains to end little changed at ~149 per dollar. 

Putin wins Russian presidential election in a landslide. Vladimir Putin was re-elected in a historic victory as he received over 87% of votes, while no other challenger garnered more than 5% of votes. Much of Putin’s focus remains on the Ukraine War and contention with the West. Putin added during a broader election speech that direct intervention from NATO could “put us a step away from full-scale World War III.”

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