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Discounting Higher for Longer Policy Messaging

US TSYS
  • Generally quiet end to a hectic week, 10Y Treasury yields off new 16Y high of 4.5064% tapped early overnight to 4.4377% after Friday's close as markets discounted the Fed and BOE "hawkish hold" or higher for longer messaging Friday.
  • Federal Reserve Governor Michelle Bowman on Friday called for "further rate hikes" to bring inflation back to target, citing too-high inflation and risk that rising energy prices could reverse past progress.
  • Boston Fed President Susan Collins said Friday further tightening is not off the table and emphasized that she expects rates to stay higher for longer. "I fully support the FOMC statement and agree with the policy guidance in the median SEP projections. I expect rates may have to stay higher, and for longer, than previous projections had suggested, and further tightening is certainly not off the table," she said in prepared remarks.
  • Meanwhile, San Francisco Fed President Daly said it's "unlikely inflation will reach 2% goal in 2024.
  • Treasury futures drew support after Flash PMI data comes out mixed: S&P Global US Manufacturing PMI (48.9 vs 48.2 est), Services PMI (50.2 vs. 50.7 est), Composite PMI (50.1 vs. 50.4 est).
  • Cross asset summary: Greenback firmer (DXY +.195 at 105.558), Gold firmer (+4.92 at 1924.94), crude firmer (WTI +.77 at 90.40) and stocks marking modest gains again after retreating late: DJIA up 45.93 points (0.13%) at 34119.34, S&P E-Mini Futures up 12.25 points (0.28%) at 4384.5, Nasdaq up 62.1 points (0.5%) at 13287.28.
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