STIR: Fed Rate Path Modestly Lower Post Minutes, Musalem Leads Speak
Feb-20 11:32
- Fed Funds implied rates are 0-1.5bp lower on the day, after little initial reaction to yesterday’s FOMC minutes which matched the tone from Powell’s press conference re not being in a hurry to cut rates again.
- Maybe most notable for monetary policy, the "vast majority" saw policy as "still-restrictive", despite it being "significantly less restrictive" after the previous 100bp of cuts. Treasuries were supported more significantly on ending QT considerations though, which could be feeding back into the broader FI rally.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 4bp May, 13.5bp Jun, 20bp Jul, 28bp Sep and 39bp Dec.
- Jobless claims headline today’s data whilst Fedspeak comes from four FOMC members who vote this year. From a mon pol angle, we put greatest focus on St Louis Fed’s Musalem, one of the most hawkish members on the committee.
- 0935 - Goolsbee (’25 voter, dove) in moderated Q&A. He has spoken various times recently, noting post-CPI that the latest reading was “sobering” but he still saw rates settling a “fair bit below” today’s levels. He then added yesterday that once inflation comes down, rates can come down more.
- 1205 - Musalem (’25 voter, hawk) speaks to Economic Club of NY (text + Q&A). He last spoke Jan 10, saying more caution is needed for further cuts whilst noting a need to be both “patient and careful”. That was prior to the end-Jan FOMC meeting and subsequent strength seen in payrolls and CPI, although the latter’s seasonality concerns have been mentioned by multiple FOMC members since then.
- 1430 - Outgoing VC Supervision Barr (perm. voter) on supervision and regulation (text + Q&A)
- 1700 - Kugler (perm. voter, center) on inflation and the Phillips Curve (text + Q&A). Kugler spoke on Feb 7, i.e. post payrolls and pre-CPI/PPI, arguing to keep rates on hold for “some time”.
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ESM ISSUANCE: 6-Month ESM-Bill Auction Results
Jan-21 11:32
| Type | 6-month bills |
| Maturity | Jul 17, 2025 |
| Amount | E1.084bln |
| Target | E1.1bln |
| Previous | E1.095bln |
| Avg yield | 2.485% |
| Previous | 2.719% |
| Bid-to-cover | 3.51x |
| Previous | 3.07x |
| Previous date | Nov 19, 2024 |
US 10YR FUTURE TECHS: (H5) Gains Considered Corrective
Jan-21 11:27
- RES 4: 110-25 High Dec 12
- RES 3: 109-31 High Dec 18
- RES 2: 109-17+ 50-day EMA
- RES 1: 109-04/109-06 Intraday high / High Dec 31
- PRICE: 108-21+ @ 11:17 GMT Jan 21
- SUP 1: 108-00/107-06 Low Jan 16 / 13 and the bear trigger
- SUP 2: 107-04 Low Apr 25 ‘24 and a key support
- SUP 3: 107-00 Round number support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
The medium-term trend condition in Treasury futures remains bearish and the recovery that started Jan 13, is considered corrective. The contract has traded through the 20-day EMA, at 108-17. This exposes 109-06, the Dec 31 high, and 109-17+, the 50-day EMA. A clear break of the 50-day average is required to strengthen a bullish theme. The bear trigger has been defined at 107-06, the Jan 13 low.
EURIBOR OPTIONS: Latest upside structure
Jan-21 11:27
- ERM5 97.75/98.00cs 1x2, bought for 4.5 in 2.5k.
- ERM5 97.75/98.125cs 1x1.5, bought for 9.25 in 6k.
