Traders Brace For June Interest Rate Hikes After Biden Confirms Powell as Fed Chair
- Overnight swaps jump, now pricing in a 25bps June liftoff
- A second hike is priced into the November meeting next year
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Traders are pricing in a ramp-up in tapering bond purchases by the Federal Reserve and the potential for a June liftoff on rate hikes after President Joe Biden selected Jerome Powell to serve another four years as the central bank’s chair.
Following the announcement, the front-end of the Treasuries curve dropped sharply as two-year yields rose as much as five basis points on the day. In the eurodollar futures market, prices also reacted aggressively as traders started to price an additional Fed hike premium into the 2022 and 2023 contracts. A second rate hike is now priced into the November 2022 Fed meeting next year, up from the December meeting at Friday’s close.