Fed Taking Inflation Seriously

Rates finish broadly weaker yet again, 30YY climbs to late session high of 2.6153% +0.0988, highest lvl since July 2019. Markets less whippy than Monday opener, better volumes, market depth w/Japan back from extended holiday weekend.

• Tsy sell-off accelerated early after StL Fed Pres Bullard comments on Bbg TV urged Fed to "move aggressively to curb inflation .. faster is better" to get "policy back to neutral", adding 50bp hike "would definitely be in the mix."
• Slight delayed reaction to hawkish StL Fed Bullard comments, lead quarterly Eurodollar futures reversed after going bid on lower 3M LIBOR settle (-0.00386 to 0.95371%, +0.01971/wk). Balance of Whites-Reds (EDU2-EDH4) weaker but off lows as markets priced in increased chances for 50bps hike in May and/or June.
• Trading desks report moderate domestic real$ buying in 3s around comment from SF Fed Pres Daly re: inflation expectations "well anchored". U.S. economy can probably escape a 1970s-style bout of stagflation Daly explained because America has emerged as an oil exporter since then and because economic growth will likely remain around its long-run trend rate.
• More Fed-speak on tap Wednesday, limited data:
  • 0800ET: Fed Chair Powell, BIS Innovation panel event, moderated Q&A
  • 1000ET: New Home Sales (801k, 810k); MoM (-4.5%, +1.1%)
  • 1145ET: SF Fed Daly, moderated discussion Bbg equality summit
  • 1300ET: US Tsy $16B 20Y Bond auction re-open (912810TF5)
  • 1500ET: StL Fed Bullard economic outlook, no text, moderated Q&A
  • 2105ET: StL Fed Bullard pre-recorded economic outlook, Credit Suisse conf