Economist's Insights

Yesterday’s Trading Activity – Yields Bounce with Chances for a March Hike

Mar 1, 2017

The “Trump Trade” was back on Monday. Stocks extended their record run, the Dollar recovered early morning losses, and Treasury yields climbed for the first session in four. The Dow and S&P both eked out a 0.1% gain as the NASDAQ added 0.3%. The Dow has now closed at a record high in 12 straight sessions. The NASDAQ ended four points shy of a new record. Treasury yields rose 5 to 6 bps between the 2- and 10-Year notes. But most surprising was a jump in the probability of a March hike implied by fed funds futures from 40% Friday to 50% Monday. With no obvious catalyst, analysts pointed to comments from Dallas Fed President Kaplan and President Trump as the drivers. However, Kaplan’s comments were hardly different than those made last week except for the substitution of one non-specific phrase, “in the near future”, for another, “sooner rather than later”, to describe when the Fed should hike. President Trump made several comments throughout the day but did mention a plan “to start spending on infrastructure big.”