Fed Speak Tempers Hawkish Pricing Ahead Blackout

Tsys trading moderately higher, inside session range as Fed speak appeared to move markets more than economic data. Reminder: Fed enter policy blackout at midnight tonight.

• Tsys reversed early pre-data gains on slightly better than expected June Retail Sales +1.0% MoM vs. 0.9% est, Sales Ex-autos +1.0% MoM vs. 0.7% est. Down-revisions to control group (-0.3% for May vs. 0.0% prior) spurred rebound with futures back to pre-data levels. Overlooked: lower-than-expected import price numbers, including an 0.4% drop in M/M ex-petroleum import prices, the 2nd consecutive contraction. The stronger dollar is starting to feed through into lower import prices
• Fed Speak delivered brief real vol as mkts extended session ranges. Rates moved higher as Atlanta Fed Bostic walked back post-CPI comments that "everything is in play for future policy decisions" that helped spur the 100bp, saying today that the Fed wants "orderly" policy transition, that moving "too drastically" would undermine economy.
• Rates sold off after StL Fed Bullard lived up to his hawk status saying he would not rule out the possibility of 100bp hike at next FOMC, seeing little difference now between 75 and 100bp.
• SF Fed Daly helped temper the hawkish rhetoric as rates pared gains stating she is already "seeing signs inflation is slowing", while concern over recession not high on her list of outcomes.
• Currently, 2-Yr yield is down 0.2bps at 3.1305%, 5-Yr is down 1.2bps at 3.0529%, 10-Yr is down 3.1bps at 2.9281%, and 30-Yr is down 1.4bps at 3.09%.