Bonds up in Response to Lower Indices

STOCK INDEX FUTURES

Mortgage applications declined 1.2% in the week ended May 20, following an 11% drop in the previous week. Applications to refinance a home fell 3.9%.

Durable goods orders in April were up 0.4% when a gain of 0.5% was expected.

The main event today will likely be the 1:00 release of the minutes from the May 4 Federal Open Market Committee’s policy meeting. With a 50 basis point interest rate hike in the fed funds rate for the next two meetings already priced in, market participants will be looking for policy hints beyond June and July.

CURRENCY FUTURES

The U.S. dollar index is higher today but has underperformed in the last two weeks. This suggests traders may be sensing that later this year the Federal Reserve may back off of its hawkishness.

A consumer climate indicator in Germany edged up to -26 heading into June of 2022 from a record low of -26.6 in May, which matched market forecasts.

The German economy grew in the first quarter by an adjusted 0.2% from the previous quarter. The figure is unchanged from the first estimate and in line with the forecasts of economists.

Interest rate differential expectations are turning neutral for the currency markets.

INTEREST RATE MARKET FUTURES

The 30-year Treasury bond futures are higher and near a one-month high in response to lower stock index futures.

Lael Brainard of the Federal Reserve will speak at 11:15.

The Treasury will auction five-year notes today.

Financial futures markets are predicting there is a 92.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 7.5% probability that the  rate will increase by 75 basis points at the June 15 policy meeting.

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