Hawkish-er FedSpeak Crushes Crude & Crypto; Bonds & Bullion Bid

The Fed once again came out swinging today into the market meltup with Cleveland Fed’s Loretta Mester warning that there is a “need to raise interest rates more to ease demand,” and reiterating that she does not see any recession or weakness that would threaten a Fed pivot. She then went one step further and warned that the rate of hiking “could be more frontloaded than I had” in the June summary of economic projections.

“Rates continue to rise this year and into next year, through the first half and maybe by then we pause and then we can start bringing them back down. But it’s very hard to project out that far.”

It’s no wonder they need to keep jawboning as financial conditions (thanks to a sudden panic bid for risky assets) are now ‘easier’ than before The Fed started hiking rates…

Source: Bloomberg

And drastically dovishly decoupled from The Fed’s expectations…

Source: Bloomberg

Equity markets could not make up their minds today whether to “fight The Fed” and rally into hawkishness or fade with the imminent recession. By the close, only Nasdaq had managed gains…

And as far as this big bounce back goes…

Bonds were broadly bid today with only the long bond weaker (30Y +1bps) as the belly outperformed (5Y -6bps). However, on the week, only 30Y Yields are lower…

Source: Bloomberg

And it’s not just the US, after a 50bps rate-hike by BoE, UK 2s10s spread inverted for the first time since 2019…

Source: Bloomberg

The dollar dived today, erasing the week’s gains…

Source: Bloomberg

Bitcoin was spanked lower again today, back below $22500…

Source: Bloomberg

Gold rebounded significantly today with futures back above $1800…

Crude crashed to fresh cycle lows today…

…trading back below its 200DMA and WTI back below $90 for the first time since Putin invaded Ukraine…

Source: Bloomberg

Finally, we wonder, does a potential drop in gasoline demand and the increasingly inverted yield curve signal an increased risk of a recession on the horizon? We’ll see if reality is going top catch up with payrolls tomorrow…

Source: Bloomberg

Remember, jobs are the last/laggiest part of the economy to signal a recession.