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Sees broader base buying, led by risk

US TSY OPTIONS

BLOCK, Oct 5Y Puts

BUNDS

2s/10s steepest since

US TSY OPTIONS

Background on Large 5Y Put Buy

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JPM writes that while the overall message at the July FOMC "may have been a little more hawkish on tapering, the overall message about the path of rates remains quite dovish."

  • JPM pointed out the statement's indication that the economy is making "progress" toward the goals required for tapering, but "didn't sound any more concerned about inflation than the June statement". Nor did Powell.
  • Overall, JPM saw the tone of Powell's presser as "less hawkish, as he said the labor market is still 'some way away' from justifying tapering." "The difference in tone between the statement and press conference may simply reflect Powell being on the dovish side of the Committee."
  • The Statement's reference to "meetings" in plural further reduces the chances of a September announcement – could be announced in November or December.
  • Powell said the FOMC would not begin tapering MBS sooner than Tsys, but left open the door to MBS being tapered faster than Tsys.
  • "One of the more dovish observations of the day: 'We want inflation expectations to be centered on 2%; we feel like they may be a little bit below that.' It's interesting that the Fed Chair thinks they are still a little low."
  • Future action: JPM doesn't see Jackson Hole "being used to communicate anything important about tapering." Taper announcement in December.