Fed Speak Tries to Douse Market Enthusiasm

  • Treasury yields are slightly higher this morning and stock futures indicated lower as some weekend Fed speak tried to dim expectations that the Fed is close to the end of its rate-hiking campaign. Despite the Fed jawboning, the 10yr Treasury is still retaining much of the rally from Thursday’s post-CPI reaction. The 10yr is yielding 3.88% while the 2yr is currently yielding 4.41%.


  • As alluded to above, Fed Governor Christopher Waller in Australia said the Fed “still has a ways to go” before stopping the rate hikes.” He added, “These rates are going to stay—keep going up—and they’re going to stay high for awhile until we see this inflation get down closer to our target.” Those comments have Treasuries on the defensive this morning.


  • That’s just the beginning of Fed Speak this week, with a plethora of officials set to probably douse market enthusiasm that a Fed pivot is near, much like Waller has already done. Fed Governor Lael Brainard will be on later this morning so it will be interesting to see if she continues with the hawkish tone.


  • Away from the Fed, we get October PPI tomorrow which won’t carry the luster of the CPI reading but PPI has been trending lower for some time while CPI, prior to October, resisted that trend. For October, overall PPI is expected up 0.4%, matching the gain in September and up 8.4% YoY vs. 8.5% the prior month. PPI ex-food and energy is expected up 0.3%, also matching the September gain and up 7.2% YoY, which would also match September’s gains.


  • Retail sales and housing reports will be the other releases of note this week. Continued slowing in housing activity is expected while retail sales are expected to be mixed on the month with a slight bias lower.


Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 5.15 5.06 5.02 5.03 5.16 5.62
0.50 5.14 5.03 4.96 4.92 5.02 5.51
1.00 5.13 5.00 4.93 4.88 4.93 5.38
2.00 4.99 4.87 4.80 4.81 NA
3.00 4.75 4.75 NA
4.00 4.70 NA
5.00 4.67 NA
10.00 NA

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Published: 11/14/22 Author: Thomas R. Fitzgerald