FOMC

Federal Reserve Bank of St. Louis President James Bullard said fears of a U.S. recession are overblown.

Federal Reserve Governor Michelle Bowman said she supports raising interest rates by 75 basis points again in July and following that with a few more half-point hikes.

The Federal Reserve has started a hiking cycle that's expected to continue with half-point increases in June and July, Marvin Loh, senior macro strategist at State Street Global Markets, will assess the June Federal Open Market Committee meeting and tell what he expects the panel to do in the future.

The lighter calendar may help ease the imbalance between demand and supply, as selling pressure in the secondary has weighed significantly on the market tone.

The U.S. central bank should raise interest rates as fast as it can without causing undue harm to financial markets or the economy, said Federal Reserve Bank of Richmond President Thomas Barkin.

Federal Reserve Bank of Cleveland President Loretta Mester said the risk of a recession in the U.S. economy is increasing, and that it will take several years to return to the central bank’s 2% inflation goal.

The Federal Reserve said it would do what is needed to get prices under control, reiterating that price stability is necessary to support a strong labor market and calling its commitment to reining in inflation “unconditional.”

Federal Reserve Bank of Kansas City President Esther George said she opposed the Fed’s biggest interest-rate increase in almost three decades because the move, combined with the shrinking of the central bank’s balance sheet, created uncertainty about the outlook.

Monday's massive selloff contributed to investors pulling more out from the mutual fund complex. Exchange-traded funds saw $1 billion of outflows and high-yield investors yanked out $1.7 billion.

If the inflation figures begin to move lower, then there is a reasonable chance of working through this cycle of rising rates without experiencing a recession.

The 75 basis point hike, prompted partly by hotter-than-expected inflation data, is the largest since 1994.

Triple-A yield curves rose five to eight basis points. Volatility somewhat eased Tuesday as investors took pause ahead of the Federal Open Market Committee meeting.

The 25-basis-point move to higher yields is the largest one-day change in triple-As since March 2020 when COVID began roiling markets. Munis could not ignore a continued selloff in UST led by inflation and recession concerns.

While a document search will not turn up the dreaded word “stagflation,” the minutes mention on multiple occasions that the FOMC sees risk to growth skewing toward the downside, and inflation risk to the upside.

Investors will be greeted Monday with an increase in supply with the new-issue calendar estimated at $6.488 billion, led by $1 billion-plus of GOs from Maryland in the competitive market.

Investors will be greeted Tuesday with a decrease in supply with the new-issue calendar estimated at $2.691 billion in $1.786 billion of negotiated deals and $904.9 million of competitive loans.

Municipals improved for the fifth session in a row with 10- and 30-year triple-A yields falling 30 basis points since Thursday. Connecticut priced $1 billion-plus of GOs and saw yields lowered in a repricing.

Federal Reserve Bank of Kansas City President Esther George said she expects the central bank to raise interest rates to 2% by August, with the further course of tightening being guided by how surging inflation cools off.

Federal Reserve Bank of Atlanta President Raphael Bostic said policy makers could potentially pause interest-rate increases in September after hiking by a half point at each of their next two meetings.

The U.S. economy needs supply-side interventions rather than interest-rate hikes by the Federal Reserve that will fail to bring inflation under control, said Nobel laureate economist Joe Stiglitz.