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Softer USD Lends Support


10s Out Of The Recent Range


Injection Helps Keep Repo Rates Subdued


Futures Unwind Overnight Losses




Higher But Within Ranges

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At the July meeting, HSBC expects the FOMC to "begin to tackle questions about the composition of tapering and how long it might last".

  • Payroll gains around or above an average 500k monthly in H2 would be enough to satisfy "substantial further progress" taper criteria.
  • Statement: Changes to be relatively limited, could note that inflation has risen "further" since June, and perhaps also acknowledge that the sectors hardest-hit by the pandemic have shown further improvement.
  • Press conference: Powell's July congressional testimony provided a roadmap for what to expect.
  • Future action: December taper announcement. On pace: if Fed were to announce a taper with a similar pattern as in 2014 (in this case, $5B/month each of MBS and Tsys), net MBS buys would conclude at end-October 2022, but net Tsy buys would still be ongoing.
  • Re MBS vs Tsy taper, "Powell could address this issue in his press conference … and additional details could come with the minutes".