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Fed "Vigorously" Using it's Tools

US TSYS
Rates trading near late session highs after the bell, decent volumes (TYU2>1.5M), 30YY -.0974 at 3.2398, yield curves managing to hold steeper profile: 2s10s +2.391a t 9.619, 5s10s +1.621 at -7.397.
  • Debatable drivers for the rally in rates that kicked off overnight deemed risk-off as stocks traded weaker/paring Tue's gains on the back of sharply lower crude oil prices (WTI fell to 101.67 low vs. 109.71 high as demand eased and markets anticipated a 3M gas-tax proposal from Pres Biden).
  • Rates held near highs in second half after Fed Chair Powell's Senate testimony initially deemed less hawkish for rates with the goal to bring inflation back down to our 2%. "We will make our decisions meeting by meeting, and we will continue to communicate our thinking as clearly as possible," he said in written testimony to Congress. "We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy."
  • Unwilling to take chance of 100bp hike off the table, followed by Chicago Fed Evans calling 75bp hike in July "very reasonable", helped keep futures in check as buy interest moderated.
  • Tsy futures holding near session highs (USU2 +2-21 at 136-01; 30YY 3.2346% at the moment) after $14B 20Y bond auction (912810TH1) re-open : 3.488% high yield vs. 3.488% WI; 2.60x bid-to-cover vs. last month's 2.50x.
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