STIR: Fed Rates Treading Water, FOMC Minutes Later Today
Aug-20 10:12
- Fed Funds implied rates are little changed overnight as they keep to relatively narrow ranges seen so far this week.
- Whilst the FOMC minutes are released later today, the main data of the week comes tomorrow with jobless claims and flash PMIs before Powell’s Jackson Hole appearance on Friday.
- Cumulative cuts from 4.33% effective: 21bp Sep, 34.5bp Oct, 54.5bp Dec, 66bp Jan and 78bp Mar.
- The SOFR implied terminal yield of 3.10% (SFRH7, unch) also keeps to particularly narrow ranges, having closed the past three sessions between 3.10-3.11%. More broadly, it holds the +/-5bp of 125bp of cuts from current levels range seen since the Aug 1 payrolls report.
- Today’s Fedspeak:
- 1100ET – Fed Gov Waller (permanent voter, dove) speaks on payments at Blockchain Symposium (text + Q&A). If anything like Bowman’s appearance yesterday, expect a simple acknowledgement that his view remains the same (“the wait and see approach is overly cautious and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve”) before moving onto areas that are less directly monetary policy relevant.
- 1400ET – FOMC minutes for the Jul 29-30 meeting, offering further color on the meeting that saw two dissenters with Bowman and Waller preferring to cut rates. This is firmly seen as secondary to Fed Chair Powell’s Jackson Hole speech at 1000ET on Friday.
- 1500ET – Bostic (non-voter) in conversation on economy (Q&A only). He said Aug 13 ““For the rest of this year, I still have one cut on my outlook… that also is predicated on the notion that labor markets stay solid. If they weaken considerably, that balance of risks starts to look differently and the appropriate path will look different as well.”
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US TSY FUTURES: CFTC Shows Asset Managers Trimming Long, Funds Trimming Short
Jul-21 10:07
The latest CFTC CoT report pointed to cover of existing positions across the major investor cohorts (in curve-wide terms) that we track during the week ending July 15.
- Asset managers trimmed net longs in all contracts outside of TU futures (where they extended their net long), reducing their net long exposure by a little over $13mln DV01, albeit remaining net long across the curve.
- Leveraged funds also trimmed net shorts in most contracts (only extending net shorts in TU & US futures), reducing exposure by ~$4.5mln DV01, but remaining net short across the curve.
- Broader non-commercial net positioning saw net shorts added to in the wings (TU, US & WN), while net shorts were trimmed in the belly & intermediates (FV, TY & UXY), with the cohort remaining net short across the curve.
Source: MNI - Market News/CFTC/Bloomberg Finance L.P.
LOOK AHEAD: US Leading Index and T-Bills
Jul-21 10:02
US Data/Speaker Calendar (prior, estimate). All times ET
- Jul-21 1000 Leading Index (-0.1%, -0.3%)
- Jul-21 1130 US Tsy $82B 13W, $73B 26W bill auctions
- FOMC now in media blackout
Source: Bloomberg Finance L.P. / MNI
OUTLOOK: Price Signal Summary - S&P E-Minis Trend Needle Points North
Jul-21 09:52
- In the equity space, S&P E-Minis traded high last week resulting in a fresh cycle high. The climb confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Note that moving average studies are in a bull-mode position highlighting a clear dominant uptrend. Sights are on 6381.50, a 1.764 projection of the Apr 7 - 10 - 21 price swing. Key support is at the 50-day EMA, at 6101.83. Support at the 20-day EMA is at 6246.73.
- A bull cycle in EUROSTOXX 50 futures remains in play and recent weakness appears corrective. Support to watch is 5281.00, the low on Jul 1 and 4. A clear break of this price point would strengthen a bearish threat. Recent gains have exposed key resistance and the bull trigger at 5486.00, the May 20 high. It has been pierced, a clear breach of it would resume the medium-term bull cycle that began Apr 7 and open the 5500.00 handle.
