Bloomberg 5/29/2023
Treasuries fell to fresh lows of the day after revised 1Q GDP numbers were revised higher, with a notable upward revision to personal consumption data. Some losses pared slightly after jobless claims printed lower than estimate for the week.
• Into the selloff, Treasuries curve flattened with front and belly of the curve leading the cheapening of yields in the aftermath of the data — 2s10s and 5s30s spreads were flatter by 2.5bp and 6bp on the day
• On outright basis, 2- to 7-year yields were higher by more than 10bp on the day
• Fed-dated OIS bid following the data with around 22bp of hike premium now priced for the July meeting; policy peak rose to around 5.42% for November FOMC vs 5.375% priced Wednesday close
• Euro-area bonds extended an earlier drop, following the move in the US; the yield on two-year German notes jumped as much as 7bps to 3.18%

Bloomberg 6/16/ 2023

Treasury yields climbed Friday after two Federal Reserve officials echoed the message that additional interest-rate increases may prove necessary to curb inflation.
Short-maturity yields most sensitive to changes in Fed policy led the move, at one point rising more than 10 basis points. Fed Governor Christopher Waller and Richmond Fed President Thomas Barkin spoke two days after the US central bank opted to leave rates unchanged for the first time in more than a year, while also signaling it’s probably not done.
The two-year note’s yield rose as much as 13 basis points to 4.78%, short of Wednesday’s high near 4.80%. Longer-dated yields rose less, the 10-year note’s as much as 9 basis points. The Fed’s target range for its policy rate is 5%-5.25%.

Bloomberg 6/14/2023
Treasuries curve pivoted around a near unchanged 7-year sector on the day, in a flattening move that saw front- and belly yields cheaper and the long end richer on the day. Both curve and outright yields ended well off the day’s extreme levels that were reached in an aggressive bear flattening reaction to the Fed’s policy decision and update to summary of economic projections.
• The sharp post-Fed reaction was faded however over Fed Chair Powell’s press conference, following some downplaying of the central bank’s economic projections by saying no decision has been made for the next few meetings
• As swaps settled over the afternoon session, a policy peak of around 5.30% was priced for this year, still well below the Fed’s latest end of year projection of 5.625%

MT Newswires - 06/14/2023

The Federal Open Market Committee held its federal funds rate target range steady at 5% to 5.25%, but revisions to the Summary of Economic Projections suggest that further tightening is expected, the FOMC's statement Wednesday afternoon showed.

Bloomberg 6/2/23

China is working on a new basket of measures
to support the property market after existing policies failed to
sustain a rebound in the ailing sector, according to people
familiar with the matter.
Regulators are considering reducing the down payment in
some non-core neighborhoods of major cities, lowering agent
commissions on transactions, and further relaxing restrictions
for residential purchases under the guidance of the State
Council, the people said, asking not to be named because the
matter is private.
The government may also refine and extend some policies
laid out in the sweeping 16-point rescue package it rolled out
last year, the people added. The plans have yet to be finalized
and may be subject to change, according to the people.

The Financial Times 5/31/2023
A top official at the Federal Reserve said there was no “compelling” reason to wait before implementing another interest rate rise should economic data confirm that more must be done to bring US inflation under control. In an interview with the Financial Times, Loretta Mester, president of the Cleveland Fed, pushed back against recent suggestions from some policymakers who argued the US central bank should forego a rate rise at its next meeting in June. “I don’t really see a compelling reason to pause — meaning wait until you get more evidence to decide what to do,” she said. “I would see more of a compelling case for bringing [rates] up . . . and then holding for a while until you get less uncertain about where the economy is going.”

The agreement this weekend between the White House and Republican congressional leaders on the US borrowing limit “relieve[s] a big piece of uncertainty about the economy”, she added.

Bloomberg 5/31/203
Federal Reserve Governor Philip Jefferson signaled the central bank is inclined to keep interest rates steady at its next meeting in June to give policymakers more time to assess the economic outlook, but such a decision wouldn’t mean hikes are finished.

Philip Jefferson, governor of the US Federal Reserve.

“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” Jefferson, recently nominated to be Fed vice chair, said Wednesday in an online presentation on financial stability and the economy. “Indeed, skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming.”

Jefferson’s speech pushes back against growing expectations by investors that the central bank would raise rates in June, with markets pricing in 69% odds of a hike at the June 13-14 meeting.

Bloomberg 5/25/2023

Traders fully priced in another quarter-point interest-rate increase by the Federal Reserve within the next two policy meetings and a more than one-in-two chance that hike could arrive as soon as next month.
The shift came as US yields rose, with the policy sensitive two-year rate rising nearly 15 basis points to 4.5%. That’s the highest level since early March, around the time when US bank failures roiled markets and spurred haven buying in government debt.
Front-end yields have moved higher for 10 straight trading sessions and the latest leg was fueled by increased optimism about a potential debt-ceiling deal and resilient economic data that could pave the way for additional Fed tightening.

Bloomberg 5/26/2023
Federal Reserve Bank of Cleveland President Loretta Mester said she wouldn’t rule out raising interest rates again next month after disappointing progress on inflation.
“Everything is on the table in June,” Mester, who doesn’t vote on rate decisions this year, said Friday in an interview on CNBC. “Inflation is still too high and it’s stubborn.”
Data released earlier Friday showed the personal consumption expenditures price index, the Fed’s preferred inflation gauge, rose a faster-than-expected 0.4% in April and was up 4.4% from a year ago — more than double the central bank’s 2% target.
“The data that came in this morning suggests we have more work to do,” she said.
Mester repeated that she doesn’t think the economy is in a place where it’s equally probable that the next move in the fed funds rate could be an increase or decrease.

Bloomberg 5/18/2023
Federal Reserve Governor Philip Jefferson suggested he is willing to be patient to see how an aggressive rise in interest rates over the past year filters through the economy, citing the delayed effects of policy and uncertainty around tighter lending standards.

“History shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect of higher interest rates,” Jefferson said Thursday in the text of remarks to the National Association of Insurance Commissioners in Washington.

He said he is uncertain how tighter lending standards resulting from recent turmoil in the banking sector will impact growth. “I intend to consider all these factors in the coming weeks as I contemplate the appropriate stance of monetary policy going forward,” he said.

Jefferson emphasized that inflation is still too high, even though growth is showing signs of slowing.
“Inflation is too high, and we have not yet made sufficient progress on reducing it,” he said. “Outside of energy and food, the progress on inflation remains a challenge.’

President Joe Biden has nominated Jefferson to serve as the Fed Board’s next vice chair. He is awaiting Senate confirmation.

His remarks suggest he is leaning toward a pause to give the monetary restraint in place time to work through the economy. However, he said he is also going to take new data on inflation and the labor market on board over the coming weeks.

Bloomberg 5/16/2023
One of the Federal Reserve’s more hawkish policymakers suggested it will need to keep raising interest rates, while two others stressed watching the impact of their tightening so far.The remarks on Tuesday by Cleveland Fed President Loretta Mester, New York Fed chief John Williams and Richmond’s Thomas Barkin reveal ongoing internal debate over a pause on rate hikes next month.Investors bet the Fed will hold fire at its June 13-14 meeting as policymakers assess the impact of the five percentage points of rate increases they’ve delivered in little over a year and strains in the banking sector. Federal Reserve Bank of Richmond President Tom Barkin says demand is cooling “but not yet cold” during an interview with Mike McKee on “Bloomberg Markets.”Williams, who is vice chair of the policy-setting Federal Open Market Committee, didn’t spell out what he favored doing next month — but left the impression that he was comfortable with a wait-and-see approach.

Bloomberg 5/19/ 2023

Federal Reserve Chair Jerome Powell gave a clear signal he is open to pausing interest-rate increases next month and said that tighter credit conditions could mean the policy peak will be lower.
“We’ve come a long way in policy tightening and the stance of policy is restrictive and we face uncertainty about the lagged effects of our tightening so far and about the extent of credit tightening from recent banking stresses,” Powell told a Fed conference Friday in Washington. “Having come this far we can afford to look at the data and the evolving outlook to make careful assessments,” he added, reading from prepared notes.
Officials raised rates by a quarter percentage point earlier this month to a target range of 5% to 5.25% and signaled they could pause. They next meet June 13-14.
“While the financial stability tools helped to calm conditions in the banking sector, developments there on the other hand are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation,” Powell said. “As a result our policy rate may not need to rise as much as it would have otherwise to achieve our goals. Of course, the extent of that is highly uncertain,” he said.

Bloomberg 5/3/2023

The Fed decision is out, and duly entails a 25 bp hike. Notably, the statement omits the comment that “some additional policy firming may be necessary,” noting instead that “the Committee will closely monitor incoming information and assess the implications for monetary policy. In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time.”

That leaves the door open for more hikes, but it also leaves it open for a pause/end to the cycle.

...Federal Open Market Committee 5/3/2023
CHAIRMAN POWELL: So taking your question, today was the raise the federal fund rate by 25 basis point. A decision on a pause was not made today. You will notice in the statement for March we had a sentence that said the committee anticipates that some additional policy firming may be appropriate. That sentence is not in the statement anymore. We took that out. Instead we are saying that in determining the extent to which policy affirming, the committee will take in to account certain factors. So that's a meaningful change that we we're no longer saying that we anticipate. And so we will be driven by incoming data meeting by meeting and we will approach that question at the June meeting.

...Federal Open Market Committee 5/3/2023:
CHAIRMAN POWELL: That's an ongoing assessment. We are going to need data to accumulate. That would mean we think we've reached that point. It is not possible to say that with confidence now. Nonetheless you will know that the summary of economic projections from the March meeting showed that in -- at that point in time, that the meeting participant thought that this was the appropriate level of the ultimate high level of rates. We don't know that. We'll revisit that at the June meeting.

Bloomberg 4/28/23

The yen fell and government bond futures
reversed losses after the Bank of Japan said it would maintain
its ultra-loose monetary policy but announced a review, in its
first meeting under new governor Kazuo Ueda.
The yen weakened 0.7% against the dollar to 134.90, while
government bond futures reversed losses to trade higher.
Japanese bank shares fell. The central bank will keep its 0.5%
ceiling for 10-year government bond yields and maintain its
short-term policy rate at minus 0.1%, it said.
The BOJ will conduct a “broad-perspective review” of
policy, with a planned time frame of around one to one-and-a-
half years. It scrapped its guidance on future interest rate
levels.

Reuters 4/18/2023

The U.S. central bank should continue raising interest rates on the back of recent data showing inflation remains persistent while the broader economy seems poised to continue growing, even if slowly, St. Louis Federal Reserve President James Bullard said.

The bulk of Fed policymakers as of March felt one more rate increase, which would raise the benchmark overnight interest rate to a range between 5.00% and 5.25%, was all that would be needed. That could come at the Fed's May 2-3 meeting.

While agreeing that the tightening cycle may be close to the finish line, Bullard feels the policy rate will need to rise another half of a percentage point beyond that level, to between 5.50% and 5.75%.

Some policymakers and analysts worry it is those final steps that could push the economy into a recession. And beyond the rate hike decision next month, the Fed will have to send some signal about what happens next - whether to keep the language in the current policy statement that "some additional policy firming may be appropriate," or point to a pause.

Given how inflation and the economy are behaving, Bullard said, the fewer promises made the better.

"You want to be responsive to incoming data through the summer into the fall," he said. "You wouldn't want to be caught giving forward guidance that said we're definitely not doing anything and then have inflation coming in too hot or too sticky."

Bloomberg 4/14/2023
Federal Reserve Governor Christopher Waller said he favored more monetary policy tightening to reduce
persistently high inflation, although he said he was prepared to adjust his stance if needed if credit tightens more than expected.

“Because financial conditions have not significantly tightened, the labor market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further,” Waller said Friday in a speech in San Antonio, Texas. “How much further will depend on incoming data on inflation, the real economy, and the extent of tightening credit conditions.”

Bloomberg 4/11/2023
Federal Reserve Bank of New York President John Williams said the March outlook of policymakers for one more interest-rate hike this year, followed by a pause, is a “reasonable starting place” though the path will depend on incoming economic data.
“We need to do what we need to do in order to make sure we bring inflation down,” Williams said Tuesday in an interview with Yahoo! Finance. He said inflation is coming down but but remains well above the Fed’s 2% goal, adding that a key underlying measure of prices has barely budged recently.
“We’ve seen the data come in consistently strong” and inflation has remained very high, Williams said. The economic impact of recent bank turmoil is uncertain, he said.

Bloomberg 4/10/2023
Traders upgraded the odds of another quarter-point rate increase by the Federal Reserve in May in the wake of strong employment data released Friday during a holiday-shortened session. Swap contracts referencing Fed meeting dates repriced to levels indicating more than 80% odds of the US central bank raising its policy rate range to 5%-5.25% on May 3.

After the US central bank set its policy band at 4.75%-5% on March 22, the odds of a May rate hike almost vanished amid a collapse in bank shares that began after several institutions failed. Since March 24, the sector has stabilized.

Bloomberg 4/4/2023
Ursula von der Leyen, president of the European Commission, is urging China to play a “constructive”
role in bringing peace to Ukraine, she says in an interview with the Financial Times.
*EU “concerned” by China’s position of friendship with Russia
** Beijing should use its ties with Moscow to rein in war
* “China is in a position to influence Russia in a constructive way, and therefore they have a responsibility”
* Stressed the importance of maintaining open diplomatic channels with Beijing
* When asked about von der Leyen’s remarks at a regular press briefing Tuesday in Beijing, Foreign Ministry spokeswoman Mao Ning said that “China is not a party to the Ukraine crisis.”
* She added that China hoped the EU “will display strategic independence and political wisdom, and take concrete steps towards lasting peace in Europe.”

Bloomberg 3/22/2023
FOMC continues pace of balance-sheet runoff, also known as quantitative tightening, leaving in place monthly caps of $60 billion for Treasuries that are allowed to mature without being reinvested and $35 billion for mortgage-backed securities

Powell FOMC Press Conference 3/22/2023
>> KYLE: Hi, Chair Powell. Thanks for taking the question. Kyle Campbell with American Banker. I have a couple questions about the balance sheet. First of all, I'm curious, at what point the financial supports that the Fed is extending through the discount window and through its enhanced lending facility might be at odds with the objective of reducing the balance sheet? I'm also curious what your thoughts are on not just the availability of reserves, but the distribution of them throughout the banking system. And at what point you might be concerned about it being scarce for certain banks. >> JEROME POWELL: So, people think of QE and QT in different ways. Let me be clear about how I'm thinking about these recent developments. Recent liquidity provision increased the size of our balance sheet. The intent and effects of it are very different from when we expand our balance sheet through purchases of longer-term securities. Large-scale purchases of long-term securities are really meant to alter the stance of policy by pushing down -- pushing up the price and down the rates, longer -term rates, which supports demand through channels we understand fairly well. The balance sheet expansion is really temporary lending to banks to meet those special liquidity demands created by the recent tensions. It's not intended to directly alter the stance of monetary policy. We do believe it's working. It's having its intended effect of bolstering confidence in the banking system. And, thereby, forestalling what might otherwise have been an abrupt and outsized tightening in financial conditions. So that's working. In terms of the distribution of reserves, we don't see ourselves as running into reserve shortages. We think that our program of allowing our balance sheet to run off predictably and passively is working. And, of course, we're always prepared to change that, if that changes. We don't see any evidence that that's changed.


...Chair Powell FOMC Press Conference 3/22/2023

>>MICHAEL: Michael McKee from Bloomberg Radio and Television. You've said the Fed would be raising interest rating and holding them there for some time. The markets priced in one more increase in May. Every meeting the rest of this year, they're pricing in rate cuts. Are they getting this totally wrong From the Fed? Or is there something different about the way you're looking at it given that you're now thinking that moves might be appropriate as opposed to ongoing. >> JEROME POWELL: We published an SEP today. It shows that basically participants expect relatively slow growth, rebalancing of supply and demand in the labor market, with inflation moving down gradually. In that most likely case, participants don't see rate cuts this year. They just don't.


Bloomberg 3/22/2023
The Federal Reserve raised interest rates by a quarter percentage point and signaled it’s not finished hiking, despite the risk of exacerbating a bank crisis that’s roiled global markets.
The Federal Open Market Committee voted unanimously to increase its target for the federal funds rate to a range of 4.75% to 5%, the highest since September 2007, when rates were at their peak on the eve of the financial crisis. It’s the second straight rise of 25 basis points following a string of aggressive moves starting in March 2022, when rates were near zero.
“The U.S. banking system is sound and resilient,” the Fed said in a statement in Washington after a two-day meeting.
At the same time, officials warned that “recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”

Dow Jones 3/7/2023

Federal Reserve Chair Jerome Powell said strong and sustained economic activity to start this year could prompt central bank
officials to accelerate interest-rate increases and will likely lead them to lift rates more than they expected to combat high inflation.

We will continue to make our decisions meeting by meeting," Mr. Powell said. "Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy."

Since officials last met on Feb. 1, several economic reports have revealed hiring, spending and inflation were hotter in January than expected, and data revisions showed inflation and demand for labor didn't slow as much as initially reported late last year.

Mr. Powell said data on hiring, spending, factory production and inflation partly reversed softening trends seen just a few weeks ago. Some of the upswing could reflect unseasonably warm January weather that can interfere with seasonal adjustments to economic data, he said.

"Still, the breadth of the reversal along with revisions to the previous quarter suggests that inflationary pressures are running higher than expected at the time of our previous [policy-setting] meeting," Mr. Powell said.

Bloomberg 2/24/23
The Federal Reserve’s preferred inflation gauges unexpectedly accelerated in January and consumer spending surged after a year-end slump, adding pressure on policymakers to keep ratcheting up interest rates.
The personal consumption expenditures price index rose 5.4% from a year earlier and the core metric was up 4.7%, both marking pickups after several months of declines. Consumer spending, adjusted for prices, jumped 1.1% from the prior month, the most in nearly two years, after consecutive declines.
US stock futures fell and Treasury yields rose as traders firmed up bets that the Fed will raise interest rates by a quarter-point at each of the next three meetings. Investors also expect a higher terminal fed funds rate.
*FED SWAPS PRICE IN PEAK POLICY RATE OF 5.45% IN JULY 2023

Bloomberg 2/15/ 23

US retail sales rose in January by the most in nearly two years, signaling robust consumer demand that could bolster the Federal Reserve’s resolve to keep raising interest rates in the face of persistent inflation.
The value of overall retail purchases increased 3% in a broad advance — the most since March 2021 — after a 1.1% drop in the prior month, Commerce Department data showed Wednesday. Excluding gasoline and autos, retail sales rose 2.6%, also the biggest increase in nearly two years. The figures aren’t adjusted for inflation.
The median estimate in a Bloomberg survey of economists called for a 2% advance in total retail sales.
All 13 retail categories rose last month, led by motor vehicles, furniture and restaurants. The report showed vehicle sales climbed 5.9% in January. The value of sales at gasoline stations were unchanged.
The report showed US consumers got off to a good start in 2023, rebounding from a spending slowdown at the end of last year. A resilient labor market marked by historically low unemployment and solid wage gains has allowed many Americans to keep spending on goods and services even as borrowing costs rise and inflation remains elevated.