Bond Market Update

Rate Cut Reservations

• The modest gains registered in the overnight trade have faded with the cash session underway. There has been nothing substantive in terms of the price action itself, yet some substantive context on the monetary policy path has been provided by a few Fed officials.
• Atlanta Fed President Bostic (non-FOMC voter) anticipates only one rate cut this year, inclusive of last week's rate cut, as he continues to worry about elevated inflation.
• St. Louis Fed President Musalem (FOMC voter) said in a speech today that he sees limited room for easing further without policy becoming overly accommodative and believes the Fed should tread cautiously.
• These are the viewpoints of only two Fed officials, neither of whom has the gravitas to move the market demonstrably. To be fair, Fed Governor Miran has also spoken to the media recently and thinks the equivalent of five rate cuts before the end of the year are necessary.
• In any case, market participants are being forced to consider the possibility that the market might not get two more rate cuts before the end of the year, as is currently priced into the fed funds futures market.
• Yield check:
  • 2-yr: +1 bp to 3.59%
  • 3-yr:  -1 bp to 3.56%
  • 5-yr: unch at 3.69%
  • 10-yr: unch at 4.14%
  • 30-yr: +1 bp to 4.77%