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Morning Notes — Bond Yields

Bond Yields

May 4, 2022

Fed: The market will be focused on: 1) Fed comments around more 50bp rate hikes at upcoming meetings; 2) whether Powell pushes back against a 75bp hike and; 3) color on where the current ~$9T balance sheet will settle.

Hawkish: 1) change in the statement to ‘continue to expeditiously remove accommodation’; 2) Powell suggests a neutral rate north of 2.375% during the press conference; 3) any mention of asset sales in the balance sheet plans, which includes a references to primarily holding Treasury securities; 4) balance sheet run off emphasis at the front-end of the curve 5) balance sheet start this month and; 6) any reference of using QT to more specifically target inflation.

Dovish: 1) no change to the statement ‘anticipates that ongoing increases in the target range will be appropriate’; 2) balance sheet run off to start in June with $60B US Treasuries/$35B MBS phased in for a period of > 3 months; 3) any reference to the potential for global risks to weigh on growth or; 4) Powell rejecting the idea of a surprise 75bp hike.  

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