MNI: FED’S POWELL: TIME HAS COME FOR POLICY TO ADJUST

MNI China Daily Summary: Friday, Aug 23

MNI: PBOC Net Injects CNY241.5 Bln via OMO Friday

MNI: PBOC Sets Yuan Parity Higher At 7.1358 Fri; +2.17% Y/Y

CHINA PBOC CONDUCTS CNY379.3 BILLION VIA 7-DAY REVERSE REPOS FRI

CHINA SETS YUAN CENTRAL PARITY AT 7.1358 FRI VS 7.1228

MNI: US JUL NEW HOME SALES +10.6% TO 0.739M SAAR

EZ/UK Bond Supply Calendar: EFSF RfP Sent, EU-Bonds Due Monday

MNI: CANADIAN JUN RETAIL SALES -0.3%; SALES EX-AUTOS/PARTS +0.3%

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

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Post-LIBOR Settle Update, New 3M High, Hike Pricing Stable

US EURODLR FUTURES
LIBOR settles resume w/ London banks back from extended Platinum Jubilee holiday. Lead quarterly EDM2 holds -0.005 at 98.2325 after latest 3M LIBOR set' climbs 0.03900 to new 2Y high of 1.66500%.
  • Rate hike pricing out the curve stable: balance of Whites through Greens (EDU2-EDH5) trading steady to -0.010, Blues-Golds (EDM5-EDH7) steady to +0.015.
  • Inversion holds to front Reds: low mkt measure of confidence in Fed managing a soft landing/avoiding recession has extended: Red Sep (EDU3) currently trading 96.61 vs. Red Jun (EDM3) at 96.495. Inversion starts to flatten out (dis-invert) around Blue Sep'25-Dec'25 trading 97.03.
  • Friday option roundup Modest overall volumes Friday w/ London banks still out for Spring and Platinum Jubilee holidays. A few notable exceptions as underlying rate futures sold off following better than expected May jobs gain of +390k vs. +310k est.
  • Fed hike expectations gained slightly out the curve while 50bp hikes at each of the next two meeting remain a lock. Implied Fed hikes firm slightly for meetings later in the year after payrolls. The 143bp for Sep takes it back to yesterday highs whilst the 199bp to year-end nudges 1bp higher and closes on the post May FOMC high of 202bps.
  • After better put buying the last couple sessions, the salient Eurodollar option trade: buy of over 40,000 Aug 97.50 calls at 7.0 vs. 97.355-.35. In Treasury options, paper bought 20,000 TYN 122 calls at 4, while 5s saw buy of 20,000 FVN 112.5 puts from 36-38.
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