Fed ease odds pared back
April 9, 2019
–Yields edged slightly higher on light volume Monday with tens +1.6 bps to 2.517%. Reds were weakest on the dollar curve, closing -2.0 on the day. Chances for a Fed cut this year have fallen, with FFF0 now 9775.5 (-1.5), indicating around 60% odds. Aug/Oct FF spread, which isolates the September FOMC, had been as low as -9.5 a week and a half ago, but settled -4.0 yesterday. The first three euro$ one-year calendar spreads are all around -25 (lowest is EDZ9/EDZ0 at -26), so the gradual easing bias is still intact.
–News today includes NFIB small business optimism, JOLTS and the 3-year auction. Clarida is slated to speak on Monetary Policy and Communication Practices, but not until 6:45pm. Tomorrow features much more news, including the CPI report, 10y auction and FOMC minutes.
–Crude oil again making new highs due to supply concerns related to Libya. CLK now around 64.70, having retraced about 2/3rds of the drop of Q4. Currencies seeing a modest bear market bounce and gold tenuously holding above 1300.
