Fears in money markets on Wednesday that a weaker-than-expected economy could delay the Fed's monetary tightening proved short-lived as hawkish comments from Fed Vice Chairman Richard Clarida helped cement expectations of a first rate hike in early 2023.
Lower-than-expected ADP jobs data at around 8:15 New York time fuelled Eurodollar futures and at one point suggested that the Fed's first 25 basis point rate hike would take place around June 2023. But the trend quickly returned, as Clarida said that "the necessary conditions for raising the target range of the federal funds rate will be met by the end of 2022."
Clarida's speech also spurred a rise in Treasury yields. The yield on the 10-year Treasury note, which had earlier fallen 5 basis points to 1.13%, rebounded after Clarida's comments to around 1.21% as of 10:34 new York time.
Eurodollar futures contracts, which cover policy expectations in late 2023 and early 2024, led the trend, with a range of about 6 to 6.5 basis points.