As the Fed whistles past the inflation graveyard…
March 1, 2021
–Quick news skim this morning includes the following snippets/headlines:
Reuters: Eurozone factory activity raced along in February thanks to soaring demand, a survey showed on Monday, although the burst of business led to a shortage of raw materials and a spike in input costs. Bloomberg: Food prices are soaring faster than inflation and incomes
Financial Times: Freeport [FCX] signals enduring cash bonanza from copper price boom
MySteel.net : Carbon steel prices in China’s domestic spot and futures markets moved up further over Feb 22-26, propelled by sustained optimism about business fundamentals
Business Insider: Everything is about to get more expensive. It’s a crucial next step for the US economic recovery
–When it trickles into business insider, with of course, a biased slant to bring indispensable meaning into otherwise incomprehensible ‘news’ then you know the market trend is long in the tooth. So bonds are bid this morning. Of course, RBA’s purchase of double ($4b rather than $2b) its daily bond intake caused Aussie 10’s to drop more than 10 bps in yield. Other CBs may follow with actions to stem long term yield increases.
–We ended the week with a flatter back end of the curve as the market moves the timing of Fed tightening forward. New highs in a few euro$ one-year calendars: EDZ21/EDZ22 gained 0.5 to 21.5, and EDH2/EDH3 also up 0.5 to 32.5. Both are close to 1/4%, indicating the market is starting to time late 2022 as an initial hike.
–Today a panel features Brainard, Williams, Bostic, Mester and Kashkari. Tomorrow Brainard speaks about the economic outlook, and Powell hones his message on Thursday.
