STIR: Modest Dovish Move In Fed Pricing On PCE
The PCE data initially generates a dovish reaction in FOMC-dated OIS, although that move and the initial rally in Tsys fade from extremes.
- The March PCE deflator numbers undershot some expectations stemming from yesterday’s Q1 core PCE release, despite printing in line to a touch above the BBG survey medians.
- Meanwhile, it became apparent that most of the firmer-than-expected Q1 core PCE data could be explained by upwards revisions to the January readings, which provided a slightly dovish tinge for markets as they digested the data.
- Still, the monthly PCE readings do little to alter the post-Q1 PCE narrative, leaving the recent acceleration in inflation run rates at the fore and market-implied Fed policy rates at the more hawkish end of the recently observed ranges.
- FOMC-dated OIS moves to price ~37bp of cuts through year end vs. ~34bp pre-data, with November FOMC pricing once again fully discounting a 25bp cut.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS/TIPS: Bank Of America: Easier Financial Conditions Should Mean Wider 30Y Breakevens
Bank of America write “the Fed is dovish according to financial conditions. Fed guidance has already supported risk assets, lower rates, & lower rate vol. A dovish Fed & easy financial conditions should see real rates contained & inflation breakevens (BE) supported. We shift our long inflation bias to 30s.”
- “30y BE is priced perfectly with the Fed's 2% PCE target. We expect upside inflation risk premium will build with an easy Fed.”
EGBS: BLOCK: Large Euro-Schatz
Trading desks report large Euro-Schatz futures cross, potentially spread vs. the large Jun'24 2Y Tsy futures buy: 25,815 DUM4 105.69.
FINLAND: Labour Fed. Extend Strikes Currently Hitting Import & Export Activity
Finland's largest labour federation, the Central Organisation of Finnish Trade Unions (SAK), has confirmed that its ongoing political strikes will continue "...without interruption, targeting the same companies – mostly affecting ports and major export firms. The labour group and its 18 member unions previously said that the strikes would continue until the end of March...."
- The latest strikes began on 11 March and have largely impacted Finland's port and rail system, significantly hampering import and export activities. The industrial action (which continues that begun in September 2023) comes in opposition to gov't labour market reforms. Yle reports, "The reforms would make it easier to fire employees, cut unemployment benfits, abolish mandated sick pay from the first day of sick leave, and increase flexibility employers have to agree terms of work locally rather than abiding by sectoral agreements, among other things."
- According to the Confederation of Finnish Industries (EK), the strikes have so far cost the companies affected EUR2bn.
- The right-leaning coalition of PM Petteri Orpo has claimed that his gov't has sought compromise and to listen, but that union demands are too extreme and that his gov't would maintain the main tenets of the reforms.
