The FED is going on tour.
After last week’s FOMC meeting, and the market’s subsequent reaction,
the Fed is putting on a show for us this week.
The highlight of the week will be J. Powell’s testimony tomorrow at the
House select subcommittee on the Covid crisis, although it’s doubtful he’ll say
anything about the FOMC meeting or future Fed policy. Today Bullard and Kaplan discussed the
economic outlook and Williams speaks at a banking conference later today. Tomorrow is Powell but before him SF’s Daly
and Cleveland’s Mester will be speaking at separate events. Wednesday, we hear from Bowman, Atlanta Pres
Bostic, and Boston Pres Rosengren.
This is quite a line-up for the week. Usually, we’re lucky to get a couple speeches
but it looks like the Fed is going all out.
What gives? Do you think the hot
inflation numbers coming out and the market’s reaction to “talking about,
talking about tapering” have anything to do with it? The Fed did a good job last time calming
fears over the high CPI print 6 weeks ago.
They are likely trying to play the same song again this week.
Below is a look at interest rates on the 1-year, 5-year,
10-year, and 30-year treasuries.
You can see in the left-hand third that the spreads were
wide, meaning the banks were making a lot of money by loaning long and
borrowing short. Then in the
middle-third, rates compressed, banks struggled, it looked like rates were
going to rise. There was a lot of talk
in the financial news of an impending recession. When banks stop lending, new money doesn’t
make it into the system, causing the economy to tighten. In the right-third, the shutdown had the
effect of money looking for safety. All
the rates were bid down because everyone wanted the safety of a treasury. Coming out of the lockdown, rates started to
spread again, giving banks another opportunity to lend long and borrow
short. Since the FOMC meeting, however,
rates have started to move the other way.
Is this just a breather before they resume their rise? The Fed sure hopes so! Otherwise, this tour they are going on will
be for naught as no tapering of asset purchases will happen.
Important and Potential Market Moving Events This Week
6am Existing Home Sales (May)
7am Fed Daly Speech
9am H.6 Money Stock
10am Fed Chair Powell Testimony
12.30pm API Crude Oil Stock Change
5.10am Fed Bowman Speech
5.45am PMI Flash (Jun)
6am New Home Sales (May)
6.30am EIA Crude & Gas Stocks Change
7am Fed Bostic Speech
7am Fed Williams Speech
4.30am Personal Income & Spending (May)
4.30am PCE Price Index (May)
6am Michigan Inflation Expectations
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