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Hawkish Take on Steady FOMC, IOER Adjust, Rising DOTS

US TSYS SUMMARY
Futures broadly weaker across the strip as markets take measure of tone from latest FOMC policy annc as hawkish to one degree or another with an eye toward late 2023.
  • "FOMC forecasts for economic growth have been revised up since our March summary economic projections, even so the recovery is incomplete and risks to the economic outlook remain."
  • Aside from a technical adjustment in IOER to 0.15%, Powell said the Fed is "continuing to increase our holdings of treasury securities by at least 80 billion per month, and of agency mortgage backed securities by at least 40 billion per month, until substantial further progress has been made toward our maximum employment and price stability goals."
  • Several waves of selling saw Eurodollar and Tsy futures ratchet lower through the initial statement, then the Fed chair's press-conference. Futures did bounce off lows as Chairman Powell reiterated effects of inflation in near term remain uncertain, but likely transitory, will fade over time and any liftoff will be well telegraphed.
  • Powell did downplay the DOTS as "not a great forecaster of future rate moves" and need to be taken with a "big grain of salt". Any future lift-off will remain "outcome based and not time based."
  • Large sell-blocks noted in 5Y futures, -15k from 123-19.5 to -17.75 before trading down to 123-07.5 low. Yield curves mixed with longer pares flatter after the bell.
  • The 2-Yr yield is up 4.2bps at 0.2052%, 5-Yr is up 11.3bps at 0.8938%, 10-Yr is up 8.3bps at 1.5754%, and 30-Yr is up 1bps at 2.1968%.
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