Short End Under Pressure On Hawkish Fed Speak

Bonds finished strong Friday, but off early highs to near middle of session range, short end weaker as market digested hawkish comments from Fed Gov Waller on CNBC, StL Fed Bullard dissenter essay and Richmond Fed Barkin in the first half.

• Barkin said the central bank's "gradual" interest rate path shown in forecasts this week depicting seven interest rate increases will not drive an economic decline, while the normalization of the balance sheet can work in the background and will begin soon.
• Yield curves bull flattened with 3s, 5s and 7s inverting vs. 10s in the first half on continued heavy short end selling and strong buying in long end (30YY falling to 2.4014% low. Note: late 2s10s Block steepener:
  • +20,000 TUM2 106-17.25, post-time bid vs.
  • -10,750 TYM2 124-17.5, well through 124-21 post-time bid
• US Biden/China Xi call headlines filtering through -- Xi sounding dovish Russia war in Ukraine: "confrontation not beneficial to anyone .. conflicts, confrontation not beneficial to anyone".
• Not much substance from Russia Pres Putin address at Luzhniki stadium in Moscow: 'The concert is dedicated to the eighth anniversary of Crimea's reunification with Russia" Tass, before video of event cut out.
• Pres Biden will travel to Brussels, Belgium on Wednesday next week, expected to speak at European council summit on Thursday, followed by G7 meeting. No set times, TBA.