More Ammo For Unfriendly Fed, But Data is at Least as Important

More Ammo For a Hawkish Fed, But Data is at Least as Important

Bonds began the day flat but lost ground quickly after ECI came in higher than expected.  This is the latest in a string of unfriendly data for the bond market.  It proves additional ammo for the Fed to table the notion of rate cuts in 2024--something that Powell had already mentioned in his last speech.  Even before this data, there was already zero chance of a rate cut tomorrow.  As Powell is likely to remind the market, the prospect of rate changes later this year depends entirely on economic data.  On that note, Wednesday's reports may provide just as much of a directional impulse as the market's reaction to the Fed.  In addition to JOLTS, ISM, and ADP we'll also get the final details on Treasury's quarterly refunding which may include a buyback announcement.  It's not that we necessarily expect that to cause a huge reaction, but it adds another layer of complexity to a very busy day.