Discussion
Not all FED communication is pre-calculated and/or in specific response to market events. But a lot more of it is than meets the eye.
The dovish end of the FOMC spectrum (Goolsbee and Bostic) was out Friday in the wake of the mixed-to-weak NFP report talking up the likelihood the Fed is finished hiking and should move on to figuring out how long to hold at the terminal rate, and the bond market appeared to confirm this dovishness with a large and sustained drop in rates across the curve.
But FED Governor Michelle Bowman was out Saturday saying she expects “additional rate increases will likely be needed to get inflation on a path down to the FOMC's 2 percent target.”
“Increases,” plural.
Bowman is a governor, and governors carry outsized weight on the FOMC. “Increases” plural on a Saturday is very intentional. Adding everything up, my strong hunch is the Fed is working in concert with Treasury Secretary Yellen to drive up long-term interest rates (see Andy Constan’s “Script” here), and is not happy to see rates drop as much as they did Friday after making good progress over the course of the week. Andy’s comment below about the large issuance guidance proving Yellen wasn’t dragging anything out in preparation for the 2024 Election is key.