US TSYS: Cash Bonds Mostly Richer In Today's Asia-Pac Session
Apr-14 00:15
TYM5 is dealing at 109-28+, +0-05 from closing levels in today's Asia-Pac session.
- The 10-year yield closed around 4.495 on Friday night and has opened just below at 4.48% this morning in Asia.
- The 10-year yield rose almost 50bps in 5 days, one of the biggest moves in that number of days since 1998.
- Ultimately though it comes down to the market pricing in a large number of cuts and the Fed consistently saying it was worried about inflation due to the President’s policies.
- Bianco Research made a good point over the weekend. “The market understands Powell is going “Volcker” and is not going to cut rates despite a weakening economy”. (per X via BBG)
- He wants to be remembered as central bank royalty like Paul Volker who was known for his decisive and aggressive stance to curb inflation, rather than Arthur Burns who was criticized for being too slow and hesitant to raise rates.
- Yields will continue to find sellers on dips. Expect any move back towards the 4.25-4.35% area to find supply.
- The key resistance back towards 4.8-5% is the first target. The market will be watching for more stress in the leveraged basis-trade unwind and any signs of sovereign selling.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
