March 28. Core PCE prices today; last impediment to a more aggressive Fed

–Today’s news includes Personal Income and Spending, both expected +0.1, and also Core PCE prices, which hit 1.7 yoy in the last release.  Another firm showing would make it much more difficult for Yellen to maintain her dovish stance in the face of opposition within the FOMC; she speaks tomorrow at 12:20 EST to the Economics Club of NY.  Employment data is released Friday.
–International Trade also out this morning, expected -62.5b amidst declining global trade data.  From Reuters this weekend, “China’s industrial profits returned to growth in the first two months of 2016, despite weakening business conditions and slowing economic growth in the world’s second-largest economy.”  Perhaps not too surprising, as China has allowed the currency to weaken to gain back export market share as the transition to a service economy remains bumpy.
–While the curve is quite flat measured by the 2/10 treasury spread at just 102.6 bps, or red/gold pack spread at 74, near the lowest level since 2008, some of the near eurodollar calendar spreads edged up this week.  For example, June’16/June’17 rose 2.5 bps to 33 on Friday (this is the peak one-yr spread).  However, given the dot forecast for 2 hikes this year, and the possibility that a decline in inflation is removed as the last excuse to begin more aggressive rate hikes, these spreads still appear somewhat underpriced.

Posted on March 28, 2016 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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