US Credit Mkt Wk Ahd: Dot Plot Focus On Wed's FOMC Policy Annc

     CHICAGO (MNI) - Don't expect anything from Atlanta Fed President Raphael

Bostic early Monday (armchair chat Community Reinvestment Act at "National

Interagency Community Reinvestment Conference" in Miami, audience Q&A, 0940ET)

as the Federal Reserve remains in media blackout on policy ahead Wednesday's

FOMC announcement.

     It's going to be pretty quiet in the lead up to the two-day FOMC meeting

with 1-, 3- and 6M bill auctions and limited second tier data that includes

February Kansas City Fed LMCI on Monday, March Philadelphia Fed Nonmfg Index and

Redbook retail sales on Tuesday.

     Highlight in the week ahead is Wednesday's FOMC policy announcement at

1400ET that includes the Summary of Economic Projection (SEP) dots followed by

Federal Reserve Chairman Powell's first press conference following a FOMC.

     The economic data schedule picks up Thursday with weekly claims, FHFA Home

Price Index, March Markit Services Index and February leading indicators.

Meanwhile, the Fed speaker blackout period ends Thursday at midnight.

     Atlanta Fed President Raphael Bostic returns Friday at an Eco-Forum in

Tennessee, Q&A expected while Minnesota Fed President Neel Kashkari participates

in a moderated Q&A session in NY Friday evening.

     On Friday, markets were pricing in 100% probability of a 25bp rate hike, so

focus is on the dot plot and r*. According to MNI's PINCH model, markets are

still pricing three rate hikes this year, while chances of a fourth hike at the

August 2018 FOMC at 60%, down from 69% seen on Monday.

     TD Securities economists posit the "curve is not pricing in an overshoot of

the neutral rate by the Fed even though this was implied in the September and

December dot plots, and the projected overshoot will likely be greater in

theMarch dot plot." TD suspects the "implied fed funds rate in 2019 and 2020 to

be higher than the neutral rate, the market needs to have conviction about

either of the following:"

     "Higher neutral rate: Perhaps the market believes that the true neutral

rate is much higher than implied by the Fed's median dot plot. However, with

productivity remaining around 1% y/y, there is not much evidence of a higher

neutral rate. Also note that even the most hawkish Fed members only see the

neutral rate in the 3-3.25% range."

     "Inflation overshoot: There are imminent signs of an inflation overshoot,

which will necessitate a higher than neutral fed funds rate to offset the

overheating of the economy. However, inflation surveys or TIPS breakevens remain

well off their highs."

     TD looks for a "unchanged 2018 median and long run dot should result in a

small dovish reaction in the rates market."

     JP Morgan economists "expect the median dot for 2018 to move from three

hikes to four, but we acknowledge that this is a close call."

     JP Morgan said the "tone from a host of Fed officials in late-February and

early March indicate that the outlook on growth and inflation has improved since

the last Summary of Economic Projections. However, with 6 participants clustered

at three hikes, it will take a shift from four participants to move the median

to four hikes for 2018. Meanwhile, the bar is lower for 2019".

     JP Morgan also said they expect the FOMC to "announce that the monthly cap

on Treasuries redeemed from the SOMA portfolio will increase from $12bn/month to

$18bn/month starting in April."

     Nomura economists suggest the March meeting may come out sounding a bit

dovish with their rate hike as "data have been mixed, Q1 real-time tracking GDP

is in the 1-handles and inflation has not delivered."

     Nomura said the while the "forward-looking" Fed is "surely optimistic

now...it is also aware of the delayed effects of all its hiking (as well as

other forms of tightening like the B/S unwind and recently the uptick in LIBOR

funding rates). With 4-5 members having to move their dots to push up 2018 to

four hikes, the risk is only 2019 and/or 2020 dots go up instead."

     The Federal Reserve also continues to gradually reduce its $4.5 trillion

balance sheet ($4.2 trillion in U.S. Treasuries and Agency MBS.) Monthly Fed

reinvestment caps consistent with the FOMC Sept. 20 decision and June 2017

addendum:

MONTHLY CAPS ON SOMA SECURITIES REDUCTIONS

US TREASURIES.../AGENCY MBS/MONTH CAP 

- Oct-Dec 2017.. $6 billion./$4 billion 

- Jan-Mar 2018.. $12 billion/$8 billion 

- Apr-Jun 2018 $18 billion../$12 billion 

- Jul-Sep 2018 $24 billion../$16 billion 

- From Oct 2018** $30 billion $20 billion

Calendar of next week's market events (data, Fed speakers): 

- Mar 19 Feb Kansas City Fed LMCI 1100ET

- Mar 19 Atlanta Fed Pres Bostic armchair chat Comm Reinvestment Act at

"National Interagency Community Reinvestment Conf" Miami, audience Q&A. 0940ET

- Mar 19 US Tsy $51B 3-Month Bills auction 1130ET

- Mar 19 US Tsy $45B 6-Month Bills auction 1130ET

- Mar 20 FOMC policy meeting kicks off

- Mar 20 Mar Philadelphia Fed Nonmfg Index (31.0, --) 0830ET

- Mar 20 17-Mar Redbook retail sales m/m (-0.3%, --) 0855ET

- Mar 20 US Tsy 1-Month Bills auction 1130ET

- Mar 21 FOMC policy meeting day 2

- Mar 21 16-Mar MBA Mortgage Applications (0.9%, --) 0700ET

- Mar 21 Q4 current account balance (-$100.6B, --) 0830ET

- Mar 21 Feb existing home sales (5.38M , --) 1000ET

- Mar 21 16-Mar crude oil stocks ex. SPR w/w (5.02M bbl, --) 1030ET

- Mar 21 FOMC policy announcement, 1400ET

- Mar 21 Fed Chair Powell press conf, 1430

- Mar 22 17-Mar jobless claims (226k, --) 0830ET

- Mar 22 Jan FHFA Home Price Index (0.3%, --) 0900ET

- Mar 22 Mar Markit Services Index (flash) (55.9, --) 0945ET

- Mar 22 Mar Markit Mfg Index (flash) (55.3, --) 0945ET

- Mar 22 18-Mar Bloomberg comfort index 0945ET

- Mar 22 Feb leading indicators (1.0%, --) 1000ET

- Mar 22 16-Mar natural gas stocks w/w (-93Bcf, --) 1030ET

- Mar 22 Mar Kansas City Fed Mfg Index (17, --) 1100ET

- Mar 22 $11 Bln 10-Year TIPS Reopening 1300ET

- Mar 22 Mar Treasury Allotments (p) 1500ET 

- Mar 22 21-Mar Fed weekly securities holdings 1630ET

- Mar 23 Atlanta Fed Pres Bostic Knoxville Eco-Forum, Tennessee, Q&A, 0810ET 

- Mar 23 Feb durable goods new orders (-3.6%, --) 0830ET

- Mar 23 Feb durable new orders ex transport (-0.3%, --) 0830ET

- Mar 23 Feb new home sales (0.593M, --) 1000ET 

- Mar 23 Feb bldg permits revision  1000ET

- Mar 23 Feb BLS state payrolls (172k , --) 1000ET

- Mar 23 Minn Fed Pres Kashkari participation moderated Q&A, NY 1030ET

- Mar 23 Q1 St. Louis Fed Real GDP Nowcast (+3.78%, --) 1100ET

- Mar 23 Q1 NY Fed GDP Nowcast (+2.7%, --) 1115ET

--MNI Chicago Bureau; tel: +1 312-431-0089; email: bill.sokolis@marketnews.com

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

[TOPICS: MTABLE,M$U$$$,M$$FI$,MN$FI$,MN$FX$]