Powell nudges hike expectations further out
August 30, 2021
–Not much reaction to Hurricane Ida, which knocked out power to New Orleans. An explosion near the Kabul airport of a car with an improvised rocket launcher (like the kind you might see on Chicago’s Dan Ryan expressway) likewise has been ignored, except of course, stocks are making new highs. And Oct Nat Gas prints 4.44 this morning, a new high, having been 2.70 in April.
–Powell’s dovish assurances in his Jackson Hole speech that there’s no “direct signal regarding the timing of interest rate liftoff” related to tapering caused rate hike hedges to be lifted in eurodollars, with the red pack (2nd year forward) rising 3.25 bps. Tens were down 3 bps to 1.31%, even as the yoy PCE deflator printed 4.2%. The signal here is borrow to buy things, the Fed will support Federal Gov’t spending and will of course support financial engineering to gin up equity prices, all in the name of Bob, who still can’t find a job from his Mom’s basement.
–EDZ1/EDZ2 settled 24.5, down 2.5 on the day, and FFF’22/FFF’23 settled 20.5 also down 2.5, so the chance of just one hike over next year was slightly trimmed. Of course, gold jumped $24/oz on Friday with GCZ1 settling 1819.50. The buying power of the dollar is being successfully eroded as is obvious to anyone who goes in a store. I bought a few nectarines at the local Jewels and it cost me over $1.10 each, and they’re supposedly in season.
