MNI ASIA OPEN: Sticky Inflation Underscores Fed Stance
- MNI FED: Bowman Supports Steady Fed Stance, Warns of Upside Risks
- MNI US/G7: Yellen To Push For Consensus On Using Russian Frozen Assets At Fin Min Meet
- MNI: Canada Mortgage Growth At Lowest Since 2001 At 3.3%
- MNI US DATA: Leading Index Misses, Stocks See First Negative Contribution Since October
US
FED (MNI): Bowman Supports Steady Fed Stance, Warns of Upside Risks: Federal Reserve Governor Michelle Bowman Friday reiterated her preference for keeping interest rates steady to allow restrictive policy to bring inflation down, adding she remains open to raising borrowing costs should data indicate progress on inflation has stalled.
- "With average core consumer price index (CPI) inflation this year through April running at an annualized rate of 4.3%, well above average inflation in the second half of last year, I expect inflation to remain elevated for some time," she said in prepared remarks to the Pennsylvania Bankers Association.
- Bowman reaffirmed her baseline outlook is for inflation to decline further with the policy rate held steady, but she sees a number of upside inflation risks on the horizon.
NEWS
US/G7 (MNI): Yellen To Push For Consensus On Using Russian Frozen Assets @ Fin Min Meet: A US Treasury Dep't official has been talking on Treasury Secretary Janet Yellen's upcoming trip to the G7 finance ministers and central bank governors meeting in Stresa, Italy taking place 23-25 May. Official: 'Yellen will discuss at G7 meeting the need to tackle China's excess industrial capacity in key sectors and new US tariffs on EVs, solar power equipment, and semiconductors.'
CANADA (MNI): Canada Mortgage Growth At Lowest Since 2001 At 3.3%: Canadian mortgage lending growth has slipped to a fresh low against a mark set back in 2001, and while that reflects the central bank's tightening campaign to tackle stubborn inflation the pace is still faster than recent economic growth. Household mortgage lending rose 3.3% in March from a year ago according to Statistics Canada data released Friday, from a pace of 3.4% in February. Data revisions showed lending also advanced at a 3.3% pace in January.
US (MNI): Schumer To Resurrect Bipartisan Border Bill, Biden Considers Exec Actions: Senate Majority Leader Chuck Schumer (D-NY) is reportedly preparing to resurrect the bipartisan border billwhich was torpedoed by allies of former president Donald Trump earlier this year.
RUSSIA (MNI): Putin Speaks On Peace Talks & Kharkiv Offensive: Russian state media carrying comments from President Vladimir Putin regarding the Russian offensive in the Kharkiv oblast of Ukraine. Says that the Russian forces are moving near Kharkiv 'according to plan', while blaming Kyiv for the Russian army's offensive.
US (BBG): BlackRock’s Rieder Says Cut, Not Hike, Would Tame US Inflation: BlackRock Inc.’s Rick Rieder has some advice that bucks conventional wisdom: The best way for the Federal Reserve to temper inflation will be to lower rates, not hold them higher.
FED (BBG): Fed Officials Suggest Interest Rates Should Stay High for Longer: Several Federal Reserve officials said the central bank should keep borrowing costs high for longer as policymakers await more evidence inflation is easing, suggesting they’re not in a rush to cut interest rates.
CHINA (BBG): PBOC Earmarks $42 Billion for State Buying of Unsold Homes: The People’s Bank of China will establish a nationwide program to unleash 300 billion yuan ($41.5 billion) in cheap funding to help state-owned companies buy unsold homes.
US TSYS Mildly Weaker Tsys Flirting with Technical Support
- Treasury futures continued to gradually extend session lows by the bell, fully unwinding Wednesday's post-CPI/Retail Sales related rally. The Jun'24 10Y futures are -10.5 to 109-05, just below initial technical support of 109-07+ (50-day EMA).
- Little data to trade off of Friday, the Conference Board leading indicator fell by more than expected in April, -0.6% M/M (cons -0.3) after -0.3% in March.
- Unscheduled Fed speak underscored the day's move as Fed Gov Bowman reiterated stance in keeping interest rates steady to allow restrictive policy to bring inflation down.
- Rate cut projections remain largely in-line with this morning's levels (*): June 2024 at -10% w/ cumulative rate cut -2.5bp at 5.313%, July'24 at -22% w/ cumulative at -8bp at 5.258%, Sep'24 cumulative -21.1bp, Nov'24 cumulative -29.2bp, Dec'24 -44.4bp.Looking ahead to next week, the minutes to the May 1 FOMC will be released next Wednesday.
OVERNIGHT DATA
US DATA (MNI): Leading Index Misses, Stocks See First Negative Contribution Since October: The Conference Board leading indicator fell by more than expected in April, -0.6% M/M (cons -0.3) after -0.3% in March.
- From the press release (see here): “Deterioration in consumers’ outlook on business conditions, weaker new orders, a negative yield spread, and a drop in new building permits fueled April’s decline. In addition, stock prices contributed negatively for the first time since October of last year.”
- “While the LEI’s six-month and annual growth rates no longer signal a forthcoming recession, they still point to serious headwinds to growth ahead. Indeed, elevated inflation, high interest rates, rising household debt, and depleted pandemic savings are all expected to continue weighing on the US economy in 2024.”
- “As a result, we project that real GDP growth will slow to under 1 percent over the Q2 to Q3 2024 period.”
MARKETS SNAPSHOT
- Key market levels of markets in late NY trade:
- DJIA up 96.15 points (0.24%) at 39895.89
- S&P E-Mini Future up 3.75 points (0.07%) at 5312.5
- Nasdaq down 13.2 points (-0.1%) at 16641.39
- US 10-Yr yield is up 4.7 bps at 4.4218%
- US Jun 10-Yr futures are down 10.5/32 at 109-5
- EURUSD up 0.0009 (0.08%) at 1.0874
- USDJPY up 0.26 (0.17%) at 155.66
- WTI Crude Oil (front-month) up $0.88 (1.11%) at $80.03
- Gold is up $39.11 (1.65%) at $2418.34
- European bourses closing levels:
- EuroStoxx 50 down 8.31 points (-0.16%) at 5064.14
- FTSE 100 down 18.39 points (-0.22%) at 8420.26
- German DAX down 34.39 points (-0.18%) at 18704.42
- French CAC 40 down 20.99 points (-0.26%) at 8167.5
US 10YR FUTURE TECHS: (M4) Bullish Despite The Latest Pullback
- RES 4: 110-16 50.0% retracement of the Feb 1 - Apr 25 bear leg
- RES 3: 110-06 High Apr 4
- RES 2: 110-00 Round number resistance
- RES 1: 109-31+ High May 16
- PRICE: 109-13+ @ 17:05 BST May 17
- SUP 1: 109-07+/108-15 50-day EMA / Low May 14 and key support
- SUP 2: 108-06 Low May 3
- SUP 3: 107-25 Low May 2
- SUP 4: 107-04 Low Apr 25 and the bear trigger
Treasuries are holding on to the bulk of this week’s gains despite a pullback. The contract has this week moved through resistance at 108-22+, the top of a bear channel drawn from the Feb 1 high. Note that resistance at 109-09+, the May 3 high, has also been cleared. This reinforces the bullish importance of the channel break and signals scope for an extension higher near-term. Sights are on 110-00 next. Initial key support is at 108-15, Tuesday’s low.
SOFR FUTURES CLOSE
- Jun 24 -0.003 at 94.695
- Sep 24 -0.010 at 94.880
- Dec 24 -0.025 at 95.105
- Mar 25 -0.035 at 95.355
- Red Pack (Jun 25-Mar 26) -0.06 to -0.05
- Green Pack (Jun 26-Mar 27) -0.06 to -0.055
- Blue Pack (Jun 27-Mar 28) -0.055 to -0.05
- Gold Pack (Jun 28-Mar 29) -0.05 to -0.05
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00032 to 5.31976 (-0.00011/wk)
- 3M +0.00006 to 5.32580 (+0.00382/wk)
- 6M +0.00513 to 5.28321 (-0.00110/wk)
- 12M +0.01638 to 5.12252 (-0.01641/wk)
- Secured Overnight Financing Rate (SOFR): 5.31% (+0.00), volume: $2.001T
- Broad General Collateral Rate (BGCR): 5.30% (+0.00), volume: $753B
- Tri-Party General Collateral Rate (TGCR): 5.30% (+0.00), volume: $737B
- (rate, volume levels reflect prior session)
- Daily Effective Fed Funds Rate: 5.33% (+0.00), volume: $78B
- Daily Overnight Bank Funding Rate: 5.32% (+0.00), volume: $265B
US Reverse Repo Operation
![](https://marketnews.com/media-library/image.png?id=52268511&width=980)
NY Federal Reserve/MNI
- RRP usage rebounds to $449.373B from $410.121B prior; number of counterparties 73. Compares to $327.066B on Monday, April 15 -- the lowest level since mid-May 2021.
EGBs-GILTS CASH CLOSE: Pullback Continues
Friday's trade closely mirrored the prior session's, with initial gains fading steadily over the rest of the day.
- ECB's Schnabel catalysed a bearish tone for core FI with her comment reported overnight that a July rate cut looked unlikely based on data to this point.
- Otherwise the main theme was a continued reconsideration of Wednesday's seemingly dovish US inflation and retail sales data, with both Bund and Gilt yields having now risen back above levels just prior to those releases. 2024 ECB / BoE implied cut pricings were pared by around 3bp apiece on the day.
- The calendar was limited in terms of speakers and data - final April Eurozone HICP was in line, with the ECB's calculated underlying inflation measures showing moderation.
- The German curve bear flattened, with the UK's bear steepening.
- Periphery EGB spreads tightened a touch, with Portugal (Moody's) and Spain (Fitch) due for ratings reviews after the close.
- Next week's calendar includes UK CPI data and an appearance by BoE's Bailey, along with flash May PMIs.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 5.9bps at 2.986%, 5-Yr is up 6.1bps at 2.561%, 10-Yr is up 5.5bps at 2.515%, and 30-Yr is up 4.7bps at 2.653%.
- UK: The 2-Yr yield is up 3.6bps at 4.31%, 5-Yr is up 4.3bps at 4.009%, 10-Yr is up 4.8bps at 4.127%, and 30-Yr is up 4.1bps at 4.6%.
- Italian BTP spread down 0.1bps at 129.9bps / Spanish down 0.2bps at 75.7bps
FOREX USD Sales Pick Up into WMR Fix
- USD selling bias becoming more evident headed into the Friday WMR fix, with EUR/USD and GBP/USD now touching new daily highs and putting GBP/USD within range of 1.2701, the mid-week high and firm resistance. Clearance here opens firmer resistance and the bull trigger at the mid-April high of 1.2709.
- USD move seemingly independent of the more muted equity and bond markets in recent trade - but is favouring precious metals, as gold takes advantage and narrows the gap with 2417.89 (late April high), and 2431.5 (Alltime high).
- No specific news or data catalyst to drive greenback weakness - but volumes are lower than average for this time of day. EUR futures see cumulative activity around 15% below the recent average.
MONDAY DATA CALENDAR
Date | GMT/Local | Impact | Flag | Country | Event |
18/05/2024 | 2145/1745 | ![]() | US | Fed Governor Adriana Kugler | |
19/05/2024 | 1930/1530 | ![]() | US | Fed Chair Jerome Powell | |
20/05/2024 | 0600/0800 | ** | ![]() | DE | PPI |
20/05/2024 | 0900/1000 | ![]() | UK | BOE's Broadbent Monetary Mechanism Workshop | |
20/05/2024 | - | ![]() | UK | DMO to hold quarterly consultation investors / GEMM consultation | |
20/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for 26 Week Bill |
20/05/2024 | 1530/1130 | * | ![]() | US | US Treasury Auction Result for 13 Week Bill |