FOMC minutes. It all hinges on “transitory”
May 27, 2019
–FOMC minutes from May 1 this afternoon. Bullard spoke earlier, saying the Fed could still cut if inflation data falls short, even if growth numbers are firm. The May press conference was where Powell deemed several of the factors holding down inflation to be “transient” so it wouldn’t be surprising to see a slightly hawkish tilt to the minutes. The question is whether the Fed is adhering to that view as USD maintains its strength.
–The contract with the most open interest on the eurodollar strip is EDZ9, with 1.612m, up nearly 17k yesterday. Next closest is EDU9 with 1.477m. There was heavy buying of EDZ9 9787c, for 7.0 covered 9762.0 and as part of the 9787/9837c spread. Settled 6.5 vs 9760.5. These are new buys with OI +36.7k. This strike requires a couple of eases by year-end to be in the money. Fed fund contracts trimmed odds of easing this year, with FFF0 down 3.5 bps to 9785.5, almost exactly one-quarter pct lower in yield than the expiring May contract at 9760.75.
–Curve flattened yesterday, with the 2y up 3.5 bps to 2.256 and tens +1.4 to 2.426. –The US administration is threatening further tech blacklisting. However, copper is at a new low this morning 2.6975 HGN9, having ticked as high as just over $3 in the middle of April. A decline of around 10% in a month.
Interesting Reuters report on Huawei (thanks Marco)
https://www.reuters.com/investigates/special-report/huawei-usa-campaign/
