[ThePitBoss]

Following the turmoil in the market this week following the Federal Reserve System Chairman Jerome Powell took a decidedly hawkish tone today at last
[See the full post at: Key Treasury Bond Auctions Along Yield Curve Next Week with Newly Hawkish Fed]

[TradersCom]

Fed’s Bullard (Hawk)

Was among those who predicted three rate hikes for 2022 in December
Balance sheet runoff should begin shortly after initial interest rate increase
Better to get rate hikes going sooner rather than later. Can slow pace if inflation moderates
Uncertain how much inflation control will depend on natural moderation versus Fed intervention
Expects inflation to moderate naturally to some degree, but not dramatically, and still above 3% at end of year
Balance sheet could decline even below pre-pandemic levels given existence now of standing repo facility
Good reasons for labor force participation to be lower today than before the pandemic
Very surprised by level of inflation; incumbent on central bank to act to maintain its credibility
Pre-pandemic employment level, not a good benchmark of current very tight labor market
Smaller balance sheet, higher policy rate means both ends of yield curve should rise in tandem

[ThePitBoss]

U.S. Treasury auctions $52 billion 3 year notes at high yield of 1.237% WI 1.241%

Bid to cover 2.47X v 6 mth average 2.42X
Dealers 22.84% % v 6 mth average 28.4%
Direct 15.51% v 6 month average 18.4%
indirect 61.7% v 53.2% 6 mth average

[ThePitBoss]

Powell’s renomination hearing is concluded

The big take away was the timing of potential balance sheet run off. Powell sees the potential for a run off later in the year citing that it could take two, three, four meetings to decide on the details. He also said that the balance sheet is more focused in the shorter end which could imply a natural reduction through not replacing maturing debt.

The comments helped to push the stocks back higher from negative levels. Nevertheless the

Dow industrial average is still near unchanged -6.01 points or -0.02% at 36062.87.
The NASDAQ index fared the best and is trading up 140.19 points or 0.94% at 15083.01.
The S&P is up 15.67 points or 0.34% at 4685.95
the Russell 2000 is trading up 9.42 points or 0.43% at 2180.57
The price of crude oil moved sharply higher help by a lower dollar. The current price is trading at $81.11 up to dollars and $0.88 for 3.68%

The USD moved lower as did the JPY due to risk on flows. The CAD and AUD are the strongest of the majors (also due to risk on flows and higher oil prices).

[TradersCom]

US treasury $36 billion 10-year notes auction at 1.723%
WI yield was at 1.720%
Tail +0.3 basis points
WI yield 1.720%
Bid to cover 2.51X v 2.5x
Dealers 16.61% v 13.5%
Directs 17.86% v16.1%
Indirects 63.5% v 70.5%

Rating C

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