Treasury yields are another 7-10 basis points lower on the front-end of the curve, with the 2-year yield back below 3% after hitting an end-of-day peak of 3.43% on June 14. Weaker than expected PMI data from Europe further fueled the recent narrative of global recession worries amid ongoing inflation pressures and central bank tightening. Aggregate Eurozone PMI fell to a 16-month low in June while the survey’s inflation measure remained elevated at the highest level since the Eurozone’s creation in 1998. U.S. equity futures are pointing to a modestly higher open with oil futures flat to slightly lower on the day.

Yesterday’s testimony from Fed Chair Powell was largely in line with the Fed’s recent narrative. Powell reiterated their primary commitment to getting inflation down and that achieving a soft landing while doing so would be “very challenging.” The market is now more convinced of the Fed’s resolve to front-load accommodation removal even at the expense of growth and unemployment, and the recent recession narrative and corresponding price rally in Treasuries appear consistent with this understanding. Powell will be testifying again today before the House Financial Services Committee, but there shouldn’t be any new information for markets.  

Jason Haley
Chief Investment Officer