Fed talks
May 20, 2019
–Equity futures opened higher last night but have now reversed into negative territory as news headlines splash stories about the fallout from Google cutting Huawei’s access to critical products. Oh, and the US sailed a warship near the Scarborough Shoal which China claims in the South Sea, prompting a warning from Beijing to stop “provocative actions” (according to the South China Morning Post). And, the US ambassador to China scheduled a visit to Tibet just for good measure. Big hitter, the Lama. Finally, Trump threatened the end of Iran, if it chose to fight with the US. Copper near new lows. Oil a bit higher. Bitcoin surged over 700 to re-test 8000.
–Speeches today by Fed officials. Clarida at 1:05 on the Fed’s communication strategy, and at 7:00 pm Chairman Powell will discuss ‘Risks to our Financial System’. This morning brings the Chicago Fed National Activity Index, expected -0.33 from -0.15 last.
–Friday saw yields edge a bit lower with tens down half a bp to 2.393%. Reds through golds +1.0 to +1.5. Early in the day, July/Aug Fed Fund spread traded as low as -5.0 (settled -4.0), an indication that odds are rising for a possible ease at the July 30 FOMC. The most negative spread is Aug/Oct at -8.5. which targets the Sept FOMC as the most probable time for a Fed cut.
