Rates as of 0500 GMT

Market Recap

After two consecutive quarters of negative GDP in the US, commentators were quick to throw the Rword recession around. But yesterdays data threw that idea into question. The SP Global servicesector purchasing managers indices PMIs were revised up almost across the board except in the UK. But the key point was the blowout US nonmanufacturing PMI from the Institute of Supply Management ISM, which put paid to that idea, at least for now.

The financial markets however still seem to disagree. The US 2yr10yr yield curve remains inverted, indicating that people think a recession is coming sometime in the next year to 1 years.

Part of that may be due to further changes in peoples estimates for whats going to happen with policy rates. In the US, we had more comments from Fed officials. St. Louis Fed President Bullard V, whos been quite vocal recently, repeated his desire to frontload rate hikes and to bring the fed funds rate to 3.75 4.00 this year. He pointed out that the Dallas Feds trimmed mean inflation rate, a gauge he watches closely, has shown no sign of turning around yet and hit the highest level since the early 1980s in June.

Meanwhile the also talkative Minneapolis Fed President Kashkari, the 1 dove on the Federal Open Market Committee FOMC, said that the idea of the Fed cutting rates in 2023 seems like a very unlikely scenario right now given what I know about the underlying inflation dynamics, even though thats exactly…