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Ignoring Hawkish Fed Comments, For Now

US TSYS SUMMARY
Mildly choppy session for rates, Tsys posting modest gains after the close, near top end Friday's range. Equities a little weaker but bouncing after the bell, S&P eminis -26.0 at 4177.5 -- vs. Thursday's all-time high of 4208.0.
  • Apparently taking Dallas Fed Kaplan (hawk, non-voter) comments that the Fed should start talking about tapering bond buying soon in stride. MNI interview w/former NY Fed pres Dudley warned the Fed may need to raise interest rates to at least 3.5% and perhaps even above 4% because its new framework will generate lags in responding to inflation that require more aggressive tightening later.
  • Mixed data: MNI Chicago Business Barometer Surges to Near 38-Year High: 72.1 vs. 66.3 in March. Meanwhile, Personal Income/Spending And PCE Price Data In Line. Focus turns to next week Friday's employment data for April, current mean estimate: 975k job gains, +895k for private sector.
  • Otherwise, generally quiet two-way month-end trade, broad decline in Govt/Credit and Intermediate credit extensions from year ago levels, while MBS surged (0.05 to 0.25).
  • Salient Eurodollar options trade: late blocks pushed session volume buyer of Red June 99.37/99.62 put spds to near 90,000 from 2.5-3.0.
  • The 2-Yr yield is down 0.2bps at 0.1604%, 5-Yr is down 1bps at 0.8541%, 10-Yr is down 0.5bps at 1.6294%, and 30-Yr is unchanged at 2.2982%.
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