(Bloomberg) -- Traders are pricing in a ramp-up in tapering bond purchases by the Federal Reserve and the potential for a June liftoff on rate hikes after President Joe Biden selected Jerome Powell to serve another four years as the central bank's chair.
Following the announcement, the front-end of the Treasuries curve dropped sharply as two-year yields rose as much as five basis points on the day. In the eurodollar futures market, prices also reacted aggressively as traders started to price an additional Fed hike premium into the 2022 and 2023 contracts. A second rate hike is now priced into the November 2022 Fed meeting next year, up from the December meeting at Friday's close.
The front-end of the Treasuries curve faces more tests during the session. There's a double two- and five-year auction scheduled, kicking off at 11:30 a.m. New York time with the $58 billion sale of two-year debt.
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