Even though I don't put much stock into the short-term moves of the equity market or the bond market, I will highlight some of the reaction the bond market had to the FOMC press conference.

Chairman Powell left interest rates unchanged this meeting but clearly opened the door for a rate cut in July. The bond market took this FOMC statement and subsequent press conference to be much more dovish than expectations with 2-year rates plunging 12 basis points on the day.

Heading into the meeting, there was only about a 30% chance of a cut priced into the bond market for the June meeting and a 90% chance of a cut priced in for the July meeting.

Those odds have shifted. Now, the market is pricing in a 100% chance of a cut in July with a 25% chance that there is a greater than 25bps cut in July.

Market implied rate cut odds by FOMC meeting date.

Market implied rate cut odds by FOMC meeting date.

The 4-week T-bill dropped 4bps to 2.14%, near a cyclical low as did the 3-month bill.

As noted, the 2-year Treasury rate fell the most, declining 12bps to a new cyclical low of 1.75%.

5-year rates tumbled just 6bps to 1.77%, "un-inverting" the spread between 2s and 5s as the market draws the expected rate cut closer and closer.

10-year rates moved lower by 2.5 bps to a new cyclical low of 2.03% and 30s fell roughly 1bps to 2.545%.

The curve steepened as expected as the market prices in rate cuts.

The Fed nearly always acts when market implied odds are greater than 70%. It was expected that there would be no rate cut today as market implied odds were only about 30% heading into the meeting.

As mentioned above, the market is now implying a 100% chance of a rate cut in July which means, unless rate markets change dramatically, the first rate cut will come in July.

The most interesting reaction, in my opinion, is the nearly 25% chance the market is now implying that we will see a greater than 25bps rate cut in July.