STIR: Fed Rates Shrug Off US Iran Strikes, Post-FOMC Fedspeak Continues
- Fed Funds implied rates are up to 1bp higher for 2025 meetings having seen little sign of net inflationary pressures from the US weekend strikes on Iran nuclear facilities.
- Cumulative cuts from 4.33% effective: 3.5bp Jul, 20bp Sep, 33.5bp Oct, 50.5bp Dec and 59.5bp Jan.
- The SOFR implied terminal yield of 3.255% (SFRZ6, +1.5bp) comes after Friday’s close of 3.24% was the lowest since Jun 4.
- Today sees some more Fedspeak - with focus on Bowman - as we continue to hear views from an increasingly divided FOMC after Friday’s first day with the blackout lifted. 7 of the FOMC see no rate cuts this year through to 2 eyeing three cuts.
- We’ve so far heard from a dovish Waller (voter) re potentially cutting in July whilst Barkin (non-voter) sees no rush to cut rates. Daly (non-voter) appeared somewhere between the two: policy is in a good place now but can’t wait so long before fundamentals necessitate cuts, more to the fall (further labor market slowing could turn into a weakening).
- 1000ET – Fed VC for Supervision Bowman (permanent voter, hawk) speaks on monetary policy and banking (text only)
- 1310ET – Goolsbee (’25 voter, dove) in moderated discussion (text tbd)
- 1430ET – Williams & Kugler (permanent voters) hot Fed Listens event with opening remarks from Kugler (text only). The nature of the event and structure of the remarks should limit market relevance.
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
