Treasury yields climbed on speculation the Federal Reserve will need to raise interest rates again as inflation remains elevated.
(Bloomberg) — Treasury yields climbed on speculation the Federal Reserve will need to raise interest rates again as inflation remains elevated.
Traders amped up wagers on a June hike to about 40% after Fed Bank of Dallas President Lorie Logan said the case for a pause next month is not clear. Central bank Governor Philip Jefferson suggested he’s watching for lagged impact of tightening. The two-year bond yield, which is more sensitive to imminent Fed moves, topped 4.2% and climbed toward the highest in a month.
The Fed is “in a really tough spot,” Katerina Simonetti at Morgan Stanley Private Wealth Management, told Bloomberg Television. “The big decision for them is the timing because once they announce that they’re done raising rates, markets are just going to assume that they’ve succeeded. And it might not necessarily be the case. Inflation so far is proving to be sticky.”
The S&P 500 traded well off session highs after House Financial Services Chairman Patrick McHenry said the two sides are “not close to being done.” The equity gauge had rallied earlier as Speaker Kevin McCarthy said he expected the House to consider a deal as early as next week — adding that negotiators were in a “much better place.”
On the corporate front, Walmart Inc. lifted its annual profit forecast after its discount model powered new market-share gains in the US, but Chief Financial Officer John David Rainey said the retailer is retaining a cautious view on US consumers. Cisco Systems Inc., the largest maker of machines that run computer networks and the internet, said orders declined 23% in the past quarter, despite a strong sales forecast that topped analysts’ projections.
Key events this week:
- Japan CPI, Friday
- ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
- New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.3% as of 2:22 p.m. New York time
- The Nasdaq 100 rose 1.1%
- The Dow Jones Industrial Average fell 0.3%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.6%
- The euro fell 0.7% to $1.0766
- The British pound fell 0.7% to $1.2399
- The Japanese yen fell 0.7% to 138.63 per dollar
Cryptocurrencies
- Bitcoin fell 2.8% to $26,585.89
- Ether fell 2.5% to $1,781.45
Bonds
- The yield on 10-year Treasuries advanced seven basis points to 3.64%
- Germany’s 10-year yield advanced 11 basis points to 2.45%
- Britain’s 10-year yield advanced 12 basis points to 3.96%
Commodities
- West Texas Intermediate crude fell 1.6% to $71.63 a barrel
- Gold futures fell 1.2% to $1,979.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carly Wanna and Peyton Forte.
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