Russia Blinks...10 Years Reverse 10 Basis Points...S+P 90 Points
At 2.27 am 10 year treasuries were at 1.84 on massive volume of over 3.7 billion... S+P futures were at 4260 after bouncing off a strong support level of 4250, and have now rallied up 90 off the lows and are currently flat at 4344... Big moves... While it is not over by a long shot, the west held firm and Putin blinked... At the end of the day, neither Ukraine ,or Russia for that matter, are economic powers, but oil is elevated and WTI did hit 96 and still trading 94..
During London time, when markets reversed, there were headlines that said that Russia had backed off from recognizing wider separatists claims to the Donbas region. Germany also suspended certification process for Nord Stream 2 pipeline, at least for now... So the West held firm and Putin blinked... He can still claim victory in some way if he gets his 700,000 Russians in the Donbas region to now be claimed as Russian citizens...but the longer he keeps 150,000 troops in attack mode, the more expensive it gets.
Rates...both 10 years and 2 years moved while the yield curve flattened. 10 years went from 1.84 to 1.94, 2 years went from 1.412 to 1.54, currently 1.52... We see 10 years with minor support at 1.98 and then back to last weeks high of about 2.07... 2 years , with an auction today, should have good support around 1.60, but more of the rate hikes for 2022 have been taken out by the markets...
Fed hikes... Wirp had gotten to 5.8 last night after rebounding this morning to 6.18.. JPM added to their hawkish view over the weekend saying the Fed will move each meeting over the next 9 consecutive meetings... While we respect their judgement, we do not see it... We still think 4 rate hikes this year and that the Fed will move slowly, especially if we get some movement towards lower inflation through the end of the second quarter... Swap traders scaled back their 50 basis move projections from 56% a week ago to 19% now...Fed's Bowman said that 50 could still happen, but that is not her base case...We have Bostic speaking both today and Thursday. Daly , Barkin, and Mester also speak this week... But we think Waller will be the more interesting Thursday night... And the Big Kahuna speaks next week in front of Congress March 2 and 3... So when Powell speaks we expect to get some clarity..
Inflation... Still a problem... While we think it will subside over the second quarter, the next round of numbers will be bad . PCE Deflator, which is the most important in Fed decision making, is expected to soar to 6% YOY on Friday with the PCE core at 5.2%.. This would both be higher than the previous month... We still think the next CPI on March 10 will be a problem...but Williams, who is part of the top 3 of the Fed, made it clear on Friday that 25 was the more likely move in March...May and June are clearly in play, but we do not see the 7 that many are predicting this year...as we have said before, if the Fed was as Hawkish as the market projects, why would they still be buying bonds until the middle of next month?...
WSJ article over the weekend..."Exodus From Bond Funds Is Mitigating the Stock Markets Swoon" Investors have pulled nearly 160 billion from money market funds and 17.5 billion from bond mutual funds in the first 7 weeks of the year. On pace to be the biggest in 7 years...much of that money has gone into equities.
At 2.27 am 10 year treasuries were at 1.84 on massive volume of over 3.7 billion... S+P futures were at 4260 after bouncing off a strong support level of 4250, and have now rallied up 90 off the lows and are currently flat at 4344... Big moves... While it is not over by a long shot, the west held firm and Putin blinked... At the end of the day, neither Ukraine ,or Russia for that matter, are economic powers, but oil is elevated and WTI did hit 96 and still trading 94..
During London time, when markets reversed, there were headlines that said that Russia had backed off from recognizing wider separatists claims to the Donbas region. Germany also suspended certification process for Nord Stream 2 pipeline, at least for now... So the West held firm and Putin blinked... He can still claim victory in some way if he gets his 700,000 Russians in the Donbas region to now be claimed as Russian citizens...but the longer he keeps 150,000 troops in attack mode, the more expensive it gets.
Rates...both 10 years and 2 years moved while the yield curve flattened. 10 years went from 1.84 to 1.94, 2 years went from 1.412 to 1.54, currently 1.52... We see 10 years with minor support at 1.98 and then back to last weeks high of about 2.07... 2 years , with an auction today, should have good support around 1.60, but more of the rate hikes for 2022 have been taken out by the markets...
Fed hikes... Wirp had gotten to 5.8 last night after rebounding this morning to 6.18.. JPM added to their hawkish view over the weekend saying the Fed will move each meeting over the next 9 consecutive meetings... While we respect their judgement, we do not see it... We still think 4 rate hikes this year and that the Fed will move slowly, especially if we get some movement towards lower inflation through the end of the second quarter... Swap traders scaled back their 50 basis move projections from 56% a week ago to 19% now...Fed's Bowman said that 50 could still happen, but that is not her base case...We have Bostic speaking both today and Thursday. Daly , Barkin, and Mester also speak this week... But we think Waller will be the more interesting Thursday night... And the Big Kahuna speaks next week in front of Congress March 2 and 3... So when Powell speaks we expect to get some clarity..
Inflation... Still a problem... While we think it will subside over the second quarter, the next round of numbers will be bad . PCE Deflator, which is the most important in Fed decision making, is expected to soar to 6% YOY on Friday with the PCE core at 5.2%.. This would both be higher than the previous month... We still think the next CPI on March 10 will be a problem...but Williams, who is part of the top 3 of the Fed, made it clear on Friday that 25 was the more likely move in March...May and June are clearly in play, but we do not see the 7 that many are predicting this year...as we have said before, if the Fed was as Hawkish as the market projects, why would they still be buying bonds until the middle of next month?...
WSJ article over the weekend..."Exodus From Bond Funds Is Mitigating the Stock Markets Swoon" Investors have pulled nearly 160 billion from money market funds and 17.5 billion from bond mutual funds in the first 7 weeks of the year. On pace to be the biggest in 7 years...much of that money has gone into equities.