Rates as of 0500 GMT

Market Recap

US markets were down yesterday, but stocks are up pretty much across the board in Asia this morning. The FX market reflects the good mood, with a riskon profile across the board the commodity currencies up and the safehaven USD, CHF and JPY down. US breakeven inflation rates rose while yields declined, pushing down real yields. That helped the dollar to fall to the bottom of the list despite the fall in US equities during the US day, which might otherwise have sparked a riskoff move that wouldve supported the dollar.

Treasury yields were pushed back down by comments from Fed Gov. Brainard, who as I mentioned before is the only registered Democrat on the Federal Open Market Committee and therefore a good candidate to replace Fed Chair Powell when his term is up next year. She gently pushed back against the recent sharp moves in Treasury yields, which she said caught my eye. She would be concerned if she saw disorderly conditions, or persistent tightening of financial conditions, that could potentially hinder progress toward the Feds goals. She repeated the Feds usual mantra that the economy remains far from our goals in terms of both employment and inflation and it will take some time to achieve substantial further progress. Even after the conditions for liftoff have been met, changes in that policy rate are likely to be only gradual, she added.

As a result, the market started to retrace some of the increase in the fed funds rate that…