FI, Stocks Surge: Mkt Expected More Hawkish Chairman Powell

Initial delayed reaction to the Fed chairs speech on policy at Brookings Inst conf, Tsy bid across board as it became apparent gist of statements was less hawkish than markets had priced in/feared. Tsy 2s10s curve topped -67.252 high before scaling back to -72.001 late.

• Bonds pared gains ("Cutting Not Something We Want To Do Soon") while yield curves climbed steeper as short end support gained traction (slowing down pace of hikes a "good way to balance risks").
• Dec step-down expectations gains as Fed funds implied hike for Dec'22 holds at 51.8bp vs 53bp earlier, Feb'23 cumulative 88.5bp (92.2bp prior) to 4.724%, terminal at 4.95% in Jun'23 vs. brief climb to 5.07% as Chairman Powell headlines initially hit.
• Heavy first half data: ADP employment growth was softer than expected in November at 127k, below the 200k expected and 190k consensus for private payrolls in Friday's release, led by a sizeable 86k decline in goods-producing industries. No revision to offset the miss.
• Tsys reverse course, extend lows post GDP, Wholesale Inventories beat:
  • GDP Annualized QoQ (2.9% vs. 2.8% est. 2.6% prior)
  • GDP Price Index (4.3% vs. 4.1% est, 4.1% prior)
  • Personal Consumption (1.7% vs. 1.6% est, 1.4% prior)
  • Core PCE QoQ (4.6% vs. 4.5% est, 4.5% prior)
  • Retail Inventories MoM (-0.2% vs. 0.5% est, -0.1% rev)
  • Wholesale Inventories MoM (0.8% vs. 0.5% est, 0.6% prior)
  • Advance Goods Trade Balance (-$99.0B vs. -$90.6B est, -$91.9B rev)