Powell on Wednesday
May 2, 2022
–Friday featured a decline in equities, with SPX -3.6% and Nasdaq Comp -4.2%. Interest rate futures remained under pressure led by weakness in front, as EDU2 and EDZ2 both made new lows for the move. On Dec 31, EDZ2 settled 9895.5. On Friday it settled 9677.0, 218.5 bps lower in four months! FFF3 settled 9717 or 2.83%, pricing exactly 250 bps (more) of hikes by year end. We’ll get started with 50 at Wednesday’s meeting, but Powell will have to talk tough even as asset values crumble. There are five FOMC meetings remaining in the year after this one.
–As mentioned, EDZ2 led the weakness, settling down 8 on the day at a yield of 3.23%. The two-yr yield rose 5 bps to 2.696%, while tens and bonds were up around 2 bps each, with tens 2.887%. EDM2/EDU2 settled at a new high of 83.5 bps, which is approximately half of EDM2/EDM3 which closed 168.5. They’re ripping the band-aid off this year. Next year is forecast to be a different story, with EDH3/EDH4 settling at new recent low of negative 17. This morning there appears to be some rotation for the new month, with stocks up slightly and commodities losing ground as the dollar continues to trade with a strong bid.
–Today brings ISM Mfg expected 57.5 from 57.1 last. FOMC on Wednesday and Payrolls on Friday, expected around 400k.
