Inflation…in fed speakers

May 6, 2021

–Fed comments yesterday from Evans, Bowman, Rosengren, Mester and Clarida downplayed inflation even as commodities tell a different story.  Below are a couple of news bullets: 

*EVANS: RISK OF AN OUTBREAK OF ACCELERATING INFLATION IS REMOTE
*EVANS: MONETARY POLICY WILL BE ACCOMMODATIVE FOR SOME TIME

– FED’S BOWMAN SAYS STILL SEES ‘SMALL’ RISK OF PERSISTENT INFLATION OUTBREAK DESPITE INCREASES ANTICIPATED THIS YEAR
– FED’S BOWMAN SAYS EXPECTS ‘UNUSUALLY STRONG’ JOB GROWTH THROUGH THE SUMMER

–ROSENGREN SAYS OIL PRICES, PENT UP DEMAND FOR GOODS AND SHIPPING DELAYS WILL TEMPORARILY DISTORT INFLATION NUMBERS THIS SPRING
– ROSENGREN SAYS THE MOST LIKELY OUTCOME REMAINS THAT INFLATION WILL NORMALIZE CLOSE TO 2 PERCENT

– MESTER SAYS SHE NEEDS TO SEE MORE LABOR MARKET IMPROVEMENT BEFORE ‘I WOULD CONSIDER THE CONDITIONS OF OUR FORWARD GUIDANCE ON ASSET PURCHASES AS BEING MET’
– MESTER: FACTORS THAT HAVE KEPT INFLATION LOW HAVEN’T GONE AWAY IN THE PANDEMIC

–A judge voided the CDC’s eviction moratorium, which some associated with a jump in tip breakevens to new highs.  Ten year treasury to tip spread ended at 247 bps.  However, yields drifted slightly lower on the day, with tens down 1 bp to 158.  

–The big trade of the day was a new buyer of 100k 3EU 9800 put for 6.5. This put settled 6.0 with the underlying Sept’24 future 9854.0.  Open interest was +80k.  Expiry is September 10, beyond the late August Jackson Hole symposium.  Eurodollar option flows are consistent in blues:  buying puts/ selling calls.  

–ADP yesterday was +742k, with Claims today expected 538k.  Tomorrow’s payrolls expected +998k.  Today’s Unit Labor Costs expected -1.0% vs +6.0% last, and tomorrow’s yoy Average hourly earnings expected to be down slightly as well, though ‘help wanted’ signs are everywhere. 

Posted on May 6, 2021 at 5:06 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply