Rate Hike Expectations Ramp Up Post Powell

Even though Fed Chair Powell didn't say anything remarkably new or different, markets read enough into his delivery to change the course of Fed Funds Rate expectations in a meaningful way.  December's forecast (per Fed Funds Futures) was closer to 5.3% this morning, but rose to 5.5% by 2pm.  There was even a reaction for the meeting in 2 weeks.  Markets don't see a 50bp hike yet, but the reaction suggests that could change if NFP and CPI data come in hot between now and then.  Short-term yields got whacked.  30yr yields moved lower on the day.  MBS split the difference and sold off moderately.  Today's video explains all of the above in greater detail. 

Econ Data / Events
    • Wholesale Inventories
      • -0.4 vs -0.4 f'cast/prev
Market Movement Recap
09:04 AM

modestly stronger overnight with lower volume exaggerating an EU-led rally.  10yr down 2.6bps at 3.94.  MBS up 2 ticks (.06).

10:38 AM

Initially weaker on Powell's prepared comments.  Brief bounce back, but settling at unchanged to slightly weaker levels.  10yr up half a bp to 3.97%.  MBS down just under a quarter point.

12:49 PM

Moving back into positive territory now, mostly due to curve trading (yield curve -102.6bs!).  10yr down 2.8bps at 3.938 and MBS up 1 tick (0.03).

02:08 PM

Weaker since 1pm with MBS down a quarter point from most recent highs and just over a quarter point on the day.  10yr up almost 1bp at 3.974.