Dec 12. Does Fischer as Fed vice-chair weaken forward guidance plans?

— Interest rate futures erased a portion of the gains made since Friday’s employment report, as the ten year note rose 5 bps to 2.845.  Red/gold pack spread up 4.25 to 293.  Softness attributed to taper concerns, a ten year note auction that was on the weaker side, and reports that Stanly Fischer would become the Fed’s vice chairman.  From BBG “He [Fischer] has voiced skepticism about using so-called forward guidance to signal the Fed’s policy intentions as much as two years in advance.”  He favors shaving back the Fed’s bond buying program.
–Stocks used the opportunity for some profit taking, with SPX down 1.1%.  We also noted some late day calendar spread buying in dollars, (EDZ4/EDZ5 61.5 to 62 for 5k) even as stocks were breaking, an indication of concern about forward guidance.  A couple of weeks ago Bill Gross tweeted that he was certain that FF would be at their current level at the end of 2015.  Does Fischer cloud that forecast?  A taper without strong forward guidance could roil markets.  In some ways the Fischer choice makes it more likely that the Fed will change thresholds on employment and inflation, and let the market INFER a time horizon.
–News today includes Jobless Claims expected 325k (possible skew due to Thanksgiving), Retail Sales, expected +0.6 but +0.3 less autos and 30 year bond auction.
–December euro$ midcurves expire Friday.

Posted on December 12, 2013 at 5:30 am by alexmanzara · Permalink
In: Eurodollar Options

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