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Tapped Out on Pricing in Hikes For Now


Tapped out on the week's hawkish Fed speak, Tsys modestly higher after the bell, well off early lows that saw 30YY tap3.9662% high, currently 3.8756% (-.0385).
Yield curves hold flatter as short end continues to underperform as central bank policy messaging got a little uncertain after Fed Governor Michelle Bowman said "Your guess as good as mine as to what happens next in the economy."

  • Tsys opened weaker, carry-over from Thu's hawkish Fed comments from Mester and Bullard (don't count out 50bp hike if necessary), but whipsawed off lows after ECB Villeroy comments (ECB in restrictive territory, action after March "less urgent").
  • Rates settled into higher range by midmorning after Richmond Fed Barkin said steady quarter-point interest rate increases until inflation is on a sustainable path back to 2% provides the best flexibility for the Fed to respond to incoming data.
  • Fed funds implied hike for Mar'23 at 28.2bp, May'23 cumulative 52.0bp to 5.101%, Jun'23 66.4bp to 5.245%, terminal at 5.29% in Aug'23.
  • Second half trade rather quiet ahead an extended holiday weekend, markets closed Monday for Presidents Day holiday, data resumes Tuesday. No scheduled Fed speakers ahead Feb FOMC minutes release on Wednesday at 1400ET.

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