FED: Inflation Came In Right On Daly's Expectation, FOMC Acts Collectively
Jul-17 17:20
- Bloomberg: Two members of the FOMC have already said they could see cutting rates in July. What’s your position on the next meeting?
- Daly: I think that's asking the wrong question. It isn’t will it be July or Sept but what’s the direction of travel. You saw this in the SEP, rates will be reduced consistent with the fact that inflation is coming down and we don’t want to unnecessarily tighten the economy in a way that hurts the labor market or growth. The second most relevant piece is where will rates settle and there I’m very much of the camp that it will be higher than in the pre-pandemic era. If you thought 2.5% pre-pandemic, I think you have look 3% or north for the nominal neutral rate going forward.
- Inflation actually came in right on my expectation. I think we’ve got policy in a good place today.
- And when asked about pressure on Powell: The collective [of the FOMC] is that we share equal responsibility when we take the vote and walk out of there. Ultimately, we are all answerable to the American people.
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US: FED Reverse Repo Operation
Jun-17 17:18
RRP usage bounces to $168.939B this afternoon from $140.759B yesterday, total number of counterparties at 37. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.
BONDS: EGBs-GILTS CASH CLOSE: Flatter Curves With Geopolitics Front Of Mind
Jun-17 17:17
European yields rose modestly Tuesday, with curves mostly flattening.
- Yields gapped higher on the open, catching up with the weakness in global bonds after Monday's cash close. Geopolitical and related inflation (energy)-related risk weighed on sentiment throughout amid the ongoing Israel-Iran conflict.
- Yields moved lower and hit session lows in a safe haven bid as the Israeli Defence Minister pointed to further attacks on Iran, a move that extended after weaker-than-expected US retail sales data.
- Core EGBs and Gilts would pull back again over the afternoon, with oil and gas prices moving higher, and some consideration given to robust US core retail data and firm import prices.
- German ZEW expectations jumped in June, with current conditions also improving.
- The German curve twist flattened, with the 2Y-5Y segment underperforming the UK which saw bear steepening and longer-end underperformance ahead of Wednesday's UK CPI data.
- Periphery / semi-core EGB spreads widened steadily through a broadly risk-off session.
- MNI's Markets Team sees downside risks to the headline UK CPI and services readings Wednesday - our preview is here.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.7bps at 1.868%, 5-Yr is up 2.1bps at 2.141%, 10-Yr is up 0.8bps at 2.535%, and 30-Yr is down 0.1bps at 2.985%.
- UK: The 2-Yr yield is up 1.7bps at 3.923%, 5-Yr is up 1.3bps at 4.053%, 10-Yr is up 1.7bps at 4.55%, and 30-Yr is up 2.9bps at 5.283%.
- Italian BTP spread up 2.4bps at 95.2bps / Spanish up 1.3bps at 63bps
FED: Instant Answers For June FOMC Meeting
Jun-17 17:14
The Instant Answers questions that we have selected for the June FOMC statement and projections are as follows (due to be released at 1400ET Wednesday):
- Federal Funds Rate Range Maximum
- Number of dissenters on size of rate move
- Median Projection of Fed Funds Rate at End of 2025
- Median Projection of Fed Funds Rate at End of 2026
- Median Longer Run Projection of Fed Funds Rate
- Number of 2025 Dots > 4.375%
- Number of 2025 Dots > 4.125%
- Number of 2025 Dots > 3.875%
- Number of 2025 Dots < 3.875%
