• Meanwhile in markets, there is no reprieve yet for bonds, equities credit and all other currencies except the mighty old dollar as Fed-speakers aren’t backing away from further tightening in the face of economic weakness.
  • At pixel time the US 10y Treasury yield just set a new post-pandemic high of 3.15, meaning that the 2018 high of 3.26 is in sight. The yield curve continues to steepen, with the 2y10y spread at a three-month high of 41bps. Over the weekend a middle-of-the road Fed-speaker, Philadelphia Fed President Barkin, refused to rule out a 75bps hike despite Chair Powell’s assurances that such a chunky moves is basically off the table for the next two meetings. The hawk’s hawks, Governor Waller and St. Louis Fed President Bullard, repeated calls that the Fed should quicky bring fed funds to neutral (which is 3.5 percent according to Bullard). Note that fed funds futures have priced in 200bps or so in hikes for the rest of the year, which equals 40bps per meeting. And futures/OIS have priced in modest odds of a 75bps hike next month.

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