Bonds Weighing On Stocks

Yesterday, Minneapolis Fed President Neel Kashkari told CNBC that he wants to see "many more months of positive inflation data" before he's ready to cut rates. He also didn't rule out a hike. Fixed-income investors are starting to realize that this is the new party line from the Fed. Earlier this year, we argued that there was no reason for the Fed to rush to lower the federal funds rate (FFR) and wrote that in a March 25 Financial Times op-ed.

The higher-for-longer outlook for the FFR weighed on demand across this week's 2-, 5-, and 7-year Treasury auctions as evidenced by weaker bid-to-cover ratios (chart)