Rates Should (Still) Be Headed Much Higher

*U.S. FEBRUARY EXISTING HOME SALES SOAR +14.5% TO 4.58 MILLION; EST. +5.0 TO 4.19M; PREV. 4.00M

The above red-hot data which just hit the tape reinforces just how menacing inflation is this regime, despite how many bond bulls continues to harp on the banks and what they perceive to be a looming dovish Fed tomorrow and beyond. 

Even though the banks in the KRE (regionals) and XLF (larger banks) are sporting similar near-term daily chart patterns (steep descending triangles) that the TNX (rates on the 10-year Note, below on daily chart) has, the difference is that KRE XLF are well below declining 200-day moving averages, whereas the TNX merely pulled back to its own 200-day of late. And that means that TNX is still in a bullish position on multiple key timeframes. 

Overall, the early-2023 rally in risk and loosening of financial conditions clearly reinvigorated the consumer with big ticket items like houses (the biggest of them all), and puts Powell in a position tomorrow where he risks runaway, rampant inflation if he chooses to pause or even cut. 

I still expect him to hike at least 25 bps and for the various Fed dot plots to be more hawkish than expected, as I suspect part of the negotiations with Yellen and the banks in recent weeks centered around Powell continuing to fight inflation while simultaneously backstopping system risk with banks.