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Middle East Tension Softens Chair Powell's Hawkish Note on Inflation

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  • Treasuries are trading near late session lows, 10Y yield tapping 4.6943% high (mid-Nov'23 level) following Fed Chairman Powell's "lack of further progress on inflation" comment as he participated in a moderated chat with BoC head Macklem in the afternoon.
  • Jun'24 10Y futures extended session low to 107-13.5, nearing technical support of 107-07+ (76.4% of the Oct - Dec ‘23 bull leg (cont)) -- before bouncing back to 107-24, trade desks citing Middle East tensions as Israel news reports War Cabinet has decided to strike back at Iran after the weekend drone attacks.
  • Risk-off support in rate did not explain a brief bounce in S&P Eminis to 5123.25 session high, some posited a relief rally as Powell/Macklem talk ended in addition to a couple buy programs. Stocks remain skittish near the close, trading at 5093.00.
  • Rates bounced slightly off weaker levels following lower than expected Building Permits (1.458M vs. 1.510M est), MoM (-4.3% vs. -0.9% est) and Housing Starts (1.321M vs. 1.485M est), MoM (-14.7% vs. -2.4% est).
  • Little reaction to in-line Industrial Production MoM (0.4% vs. 0.4% est, prior up-revised to 0.4% from 0.1%), Capacity Utilization (78.4% vs. 78.5% est, prior up-revised to 1.2% from 0.8%).
  • Look ahead: Beige Book, TIC Flows and more Fed speakers later in the evening: Cleveland Fed Mester on a Federal Reserve update (Q&A) at 1730ET, Fed Gov Bowman IIF Global Outlook Forum (no text, Q&A) at 1915ET.
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  • Treasuries are trading near late session lows, 10Y yield tapping 4.6943% high (mid-Nov'23 level) following Fed Chairman Powell's "lack of further progress on inflation" comment as he participated in a moderated chat with BoC head Macklem in the afternoon.
  • Jun'24 10Y futures extended session low to 107-13.5, nearing technical support of 107-07+ (76.4% of the Oct - Dec ‘23 bull leg (cont)) -- before bouncing back to 107-24, trade desks citing Middle East tensions as Israel news reports War Cabinet has decided to strike back at Iran after the weekend drone attacks.
  • Risk-off support in rate did not explain a brief bounce in S&P Eminis to 5123.25 session high, some posited a relief rally as Powell/Macklem talk ended in addition to a couple buy programs. Stocks remain skittish near the close, trading at 5093.00.
  • Rates bounced slightly off weaker levels following lower than expected Building Permits (1.458M vs. 1.510M est), MoM (-4.3% vs. -0.9% est) and Housing Starts (1.321M vs. 1.485M est), MoM (-14.7% vs. -2.4% est).
  • Little reaction to in-line Industrial Production MoM (0.4% vs. 0.4% est, prior up-revised to 0.4% from 0.1%), Capacity Utilization (78.4% vs. 78.5% est, prior up-revised to 1.2% from 0.8%).
  • Look ahead: Beige Book, TIC Flows and more Fed speakers later in the evening: Cleveland Fed Mester on a Federal Reserve update (Q&A) at 1730ET, Fed Gov Bowman IIF Global Outlook Forum (no text, Q&A) at 1915ET.