Notes for Wed, Apr 29, 2026

No fresh prints overnight; basis trade and 2Y-higher lean intact, with FOMC + Warsh trimmed-mean debate as the catalysts.

Tape — status quo holds

No observation updates since last night's close. Friday's EFFR 3.64% is the last fixed print in our system; Monday's print drops at 9 AM ET and doesn't yet exist anywhere we cite. SOFR's last mark is 3.66% on 04-27^[1], +2bp through EFFR — basis intact, no escalation. RRP empty at $0.36B on 04-27^[2]; T10Y2Y at 0.57bp on 04-27^[3] — curve flat, no flight-to-cuts signal yet. The plumbing thesis carries unchanged: stay short SOFR vs EFFR basis into the reserve refill, watch month-end Friday for the squeeze-residue tell.

Risks the view: if Monday's SOFR (drops 9 AM) prints 3.67%+ despite TGA bleeding from the $1,038B 04-20 peak to $974B on 04-24^[4], the squeeze is structural and the basis call has to be re-marked. Re-check at 9:30.

Front end — FOMC week, Warsh wildcard layered

Skanda's public April FOMC preview landed Monday: the Committee is probably internally more hawkish than the projections imply, and there's a real possibility of a hawkish pivot later this year^[5]. Pair that with his trimmed-mean piece (yesterday) flagging the methodological fragility of Warsh's preferred Dallas Fed measure^[6], and the front-end setup is two-sided: dovish if Powell defends the cut bias, hawkish-vol if confirmation Q&A forces a Warsh trimmed-mean defense in public. DGS2 at 3.78% on 04-24^[7] is the mark to fade — lean higher into the May data window.

Alternate read considered: a clean Powell hold + soft NFP would let 2Y break 3.70% and the lean fails. Weighting against: hawkish drift from Goolsbee/Hammack/Musalem hasn't reversed, and the asymmetry favors the hike-talk camp on the next CPI surprise. Assumes Warsh confirmation timeline holds and the trimmed-mean debate doesn't get back-burnered by an Iran headline.

Bank capital — Basel testimony as backdrop

BPI's Greg Baer testified yesterday — capital still ~5% higher than Powell's 2019 'about right' baseline despite the Basel III Endgame re-proposal, and operational/market risk are double-counted across standardized + stress test stacks^[8]. Not a rates input today, but file for dealer-balance-sheet binding into year-end stress-test cycle. If GMS methodology stays as-is into Q3 capital plans, primary-dealer Treasury intermediation capacity is the constraint to watch — not a today trade, a Q3 setup.

Citations

1. [1]SOFR's last mark is **3.66% on 04-27** (SOFR 3.66% on 2026-04-27) — NY Fed SOFR · Apr 27, 2026
2. [2]RRP empty at **$0.36B on 04-27** (RRPONTSYD $0.36B on 2026-04-27) — FRED RRPONTSYD · Apr 27, 2026
3. [3]T10Y2Y at **0.57bp on 04-27** (T10Y2Y 0.57 on 2026-04-27) — FRED T10Y2Y · Apr 27, 2026
4. [4]TGA bleeding from the $1,038B 04-20 peak to $974B on 04-24 (TGA closing balance $974B on 2026-04-24) — Treasury General Account · Apr 24, 2026
5. [5]the Committee is probably internally more hawkish than the projections imply, and there's a real possibility of a hawkish pivot later this year (We're betting the Committee is probably internally more hawkish more than they are currently projecting. There is a real possibility of a hawkish pivot later this year.) — Commentary · employamerica.org
6. [6]his trimmed-mean piece (yesterday) flagging the methodological fragility of Warsh's preferred Dallas Fed measure (With Warsh likely to be confirmed as Fed Chair soon, MacroSuite subscribers will be receiving more timely analysis and nowcasts of Trimmed Mean PCE inflation.) — Commentary · employamerica.org
7. [7]**DGS2 at 3.78% on 04-24** (DGS2 3.78% on 2026-04-24) — FRED DGS2 · Apr 24, 2026
8. [8]capital still ~5% higher than Powell's 2019 'about right' baseline despite the Basel III Endgame re-proposal, and operational/market risk are double-counted across standardized + stress test stacks (BPI's Baer testifies Basel III Endgame revisions strike balance on granularity vs. complexity; capital still 5% higher than Powell's 2019 'about right' baseline despite proposal. Key unresolved issue: operational and market risk double-counted across standardized approach and stress tests.) — Commentary · bpi.com

Generated by Short Rates Desk. Informational only. Not investment advice.

2Y +10bp intraday on durables, oil shock and Powell's messy farewell; SOFR-EFFR basis collapsed to zero, lean higher into May data.

Tape — basis crushed, front end repriced

Morning lean paid. 2Y ripped on the day to 3.94% intraday^[1] — last fixed mark was DGS2 at 3.78% on 04-27^[2], so the move is a clean +16bp gap from yesterday's close. SOFR printed 3.64% on 04-28^[3], two bp inside Monday's print and matching EFFR at 3.64% on 04-28^[4] — the +2bp SOFR-vs-EFFR basis the morning flagged collapsed to flat. RRP at $0.36B on 04-27^[5] ticked up to $0.64B on 04-28^[6] (still effectively empty); T10Y2Y closed 0.52bp on 04-28^[7], fractionally flatter than Monday's 0.57bp on 04-27^[8] as the front end did the work. TGA at $1,002B on 04-27^[9] — refill paused vs the $1,038B 04-20 peak, so the GSE/Treasury bid we worried about Monday isn't pressing.

Alternate read considered: SOFR drop could be plumbing (month-end approaching, GSE cash returning) rather than basis vindication. Weighting against — EFFR didn't move, and the convergence happened on the same session the front end was selling off, so this isn't a flight-to-cash distortion.

Front end — Powell's farewell breaks four ways

Hold at 3.50-3.75% as expected — but four dissents, the most since 1992^[10]. Miran dissented for a cut; Hammack, Kashkari, and Logan voted against the easing bias^[11]. Statement language hardened: inflation now described as 'elevated' (was 'somewhat elevated' in March)^[12], with explicit reference to recent global energy prices. Powell at the presser flagged near-term inflation lift from energy^[13] and confirmed he stays on as a Fed governor past May 15^[14]. Fed funds futures now price ~50% odds of a 25bp hike by April 2027^[15] — a regime change from yesterday's pure-pause baseline. Polymarket has flipped to 'no cut before YE' as the modal path^[16].

Skanda's hawkish-pivot risk played out exactly as the morning brief flagged. Three regional presidents and one governor breaking against the Committee's median is the loudest possible 'internally more hawkish than projections imply' tell — and it landed before Warsh's seat is even confirmed.

Risks to the view: the dissents skew dove-symmetric (Miran on one side, three on the other), so a soft May NFP plus an Iran de-escalation headline could let Miran's camp grow rather than the hawks. Assumes Warsh confirmation lands by/around May 15 and the durables/inflation read isn't reversed by a stagflation scare.

Data — durables blowout drove the tape

Durable goods +0.8% MoM vs +0.5% expected, ex-transports +0.9% vs +0.4%, and capex ex-aircraft +3.3% vs +0.5%^[17] — the core capex print is the kind of beat that single-handedly removes near-term cut conviction. Housing starts 1.50MM beat 1.38MM but permits at 1.37MM missed 1.39MM^[18] — softer underlying signal that didn't matter for today's tape. Wholesale inventories +1.4% MoM vs +0.4%^[19] (largest miss in months), retail +0.7% vs +0.1% — ambiguous (supply normalization vs demand stall) but front end read it through the durables lens.

The inventory ambiguity is the live counter-narrative: if next week's retail sales prints soft, the build looks like demand cooling, and the dovish dissent gets a tailwind. Watch the May 8 NFP — that's the binary.

Energy & geopolitics — Brent through $118, OPEC fractures

Brent above $118.50/bbl, highest since June 2022^[20], after Trump rejected Iran's reopening offer and CENTCOM prepped 'short-wave' strikes. UAE announced OPEC exit effective May 1^[21] — structural break in cartel discipline that doesn't move spot today but changes the supply curve into H2. API crude draw of 6.2MM bbl vs ~flat consensus, gasoline -6.1MM, distillates -4.5MM^[22] — clean prompt-month bullish print, not just headline noise.

This is what the Fed statement language change was responding to. The energy shock is now feeding directly into front-end pricing through inflation expectations rather than just being headline color.

Warsh — clears committee, transition risk drains

Senate Banking confirmed Warsh 13-11 along party lines^[23] — first-ever party-line committee vote for a Fed chair, but procedurally on track. Pirro's DOJ probe ended last week, Tillis voted yes, and the May 15 succession timeline now looks workable. Powell will stay as governor 'for a period of time to be determined' — removes the 'who chairs after May 15' tail risk that was live in March.

Dimartino Booth and Bianco both flagged that the new chair faces a Greenspan-1996-style credibility burden, and today's four-dissent meeting is exactly the messy-committee inheritance Warsh told the Senate he wanted. Bank-capital and plumbing items (Basel III, Q3 stress test cycle) carry unchanged into the new regime.

Citations

1. [1]2Y ripped on the day to 3.94% intraday (*US TWO-YEAR YIELD RISES 10 BASIS POINTS ON DAY TO 3.94%) — Commentary · twitter.com
2. [2]DGS2 at 3.78% on 04-27 (3.78) — FRED DGS2 · Apr 27, 2026
3. [3]SOFR printed 3.64% on 04-28 (3.64000%) — NY Fed SOFR · Apr 28, 2026
4. [4]EFFR at 3.64% on 04-28 (3.64000%) — NY Fed EFFR · Apr 28, 2026
5. [5]$0.36B on 04-27 (0.363) — FRED RRPONTSYD · Apr 27, 2026
6. [6]$0.64B on 04-28 (0.643) — FRED RRPONTSYD · Apr 28, 2026
7. [7]T10Y2Y closed 0.52bp on 04-28 (0.52) — FRED T10Y2Y · Apr 28, 2026
8. [8]0.57bp on 04-27 (0.57) — FRED T10Y2Y · Apr 27, 2026
9. [9]TGA at $1,002B on 04-27 ($1002382M closing) — Treasury General Account · Apr 27, 2026
10. [10]Hold at 3.50-3.75% as expected — but four dissents, the most since 1992 (Powell's final meeting produces highest dissent count since 1992) — Commentary · twitter.com
11. [11]Miran dissented for a cut; Hammack, Kashkari, and Logan voted against the easing bias (Three bank presidents wanted to ditch the easing bias, and a governor dissented for a rate cut) — Commentary · twitter.com
12. [12]inflation now described as 'elevated' (was 'somewhat elevated' in March) (Inflation is now 'elevated' not 'somewhat' due to 'recent increase in global energy prices') — Commentary · twitter.com
13. [13]near-term inflation lift from energy (*POWELL: IN NEAR TERM, HIGHER ENERGY PRICES WILL BOOST INFLATION) — Commentary · twitter.com
14. [14]stays on as a Fed governor past May 15 (Powell: 'I will continue to serve as a governor for a period of time to be determined.') — Commentary · twitter.com
15. [15]Fed funds futures now price ~50% odds of a 25bp hike by April 2027 (*FED SWAPS PRICE 50% OF 25BP RATE HIKE BY APRIL 2027) — Commentary · twitter.com
16. [16]Polymarket has flipped to 'no cut before YE' as the modal path (A rate cut before year end is no longer the more likely outcome, per Polymarket) — Commentary · twitter.com
17. [17]Durable goods +0.8% MoM vs +0.5% expected, ex-transports +0.9% vs +0.4%, and capex ex-aircraft +3.3% vs +0.5% (Durable Goods Orders 0.8%, Exp. 0.5%; Durables ex transports 0.9%, Exp. 0.4%; Cap Goods Orders nondef ex aircraft 3.3%, Exp. 0.5%) — Commentary · twitter.com
18. [18]Housing starts 1.50MM beat 1.38MM but permits at 1.37MM missed 1.39MM (Housing Starts 1.502MM, Exp.1.380MM; Housing Permits 1.372MM, Exp. 1.390MM) — Commentary · twitter.com
19. [19]Wholesale inventories +1.4% MoM vs +0.4% (Wholesale Inventories 1.4%, Exp. 0.4%) — Commentary · twitter.com
20. [20]Brent above $118.50/bbl, highest since June 2022 (Brent $118, about to top post-war highs) — Commentary · twitter.com
21. [21]UAE announced OPEC exit effective May 1 (UAE says it's leaving the OPEC oil cartel from May 1) — Commentary · twitter.com
22. [22]API crude draw of 6.2MM bbl vs ~flat consensus, gasoline -6.1MM, distillates -4.5MM (Crude -6.234MM, Exp. -190K; Gasoline -6.075MM; Distillates -4.494MM) — Commentary · twitter.com
23. [23]Senate Banking confirmed Warsh 13-11 along party lines (Kevin Warsh's Fed nomination clears the Senate Banking Committee, as expected, on a 13-11 party-line vote) — Commentary · twitter.com

Generated by Short Rates Desk. Informational only. Not investment advice.