All eyes back on the Federal Reserve

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While the testimony suggested that the bank's problems may be isolated, investors' focus moved back to inflation risks and the implications of higher interest rates from the Fed. ´´The next FOMC meeting is May 2-3 and WIRP suggests around 55% odds of 25 bp hike then.  After that, it’s all about the cuts.  Nearly two cuts by year-end are priced in.  While down from 4-5 cuts priced in during the height of the banking crisis earlier this month, even two cuts seem very unlikely.  In that regard, Jerome Powell said after the March 22 decision that Fed officials “just don’t see” any rate cuts this year,´´ analysts at Brown Brothers said. 


Meanwhile, US Treasuries benchmark 10-year yields moved higher on Tuesday but pared gains after the Treasury Department saw solid demand for an auction of five-year notes. The benchmark 10-year notes were higher by 3.6 basis points to 3.564%, from 3.528% late on Monday.

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