US Credit Mkt Wk Ahd: Heavy Data Nxt Wk/Fed Speak Pre-Blackout

     CHICAGO (MNI) - Rates markets continued to trade strong in lead-up to and

the day after Wednesday's minutes release from the May 1-2 FOMC, showing little

initial reaction to dovish/less hawkish tone (depending on your viewpoint, as

others see "symmetry" as being "preemptively hawkish").

     Multiple mentions of symmetrical objective, willingness to let things run

hot and tweaking interest on excess reserves continue to be digested by pundits.

     Yields have drifted off multi-year highs (10YY 3.12%) from late last week

to below 3.0% late Thursday (10YY 2.979%) as US dollar correlation to Japanese

Yen reasserted itself (dipping below 109.0 briefly).

     While a rate hike is still expected at the June FOMC, the drop in yields

corresponds to a decline in rate hike probability out the curve with September

below 40%. Both Fed presidents Bostic (voter) and Harker (non-voter) expressed

comfort with three hikes in 2018.

     Meanwhile, political turmoil surrounding Italy, Turkey, emerging market

stress, trade negotiations with China and putting North Korea summit plans on

hold (and new sanctions being considered) continue to lend a certain amount

risk-off support for rates.

     Indeed, Fed's Bostic conceded that geopolitical tensions and uncertainty

can "weigh on confidence."

     Needless to say, market participants do not appear overly eager to tie on

additional risk heading into extended Memorial day holiday weekend in the U.S.

(UK markets closed Monday as well.

     U.S. markets will return to a surfeit of data (GDP, PCE, PMI) culminating

in the May employment data next Friday, June 1.

     Credit Suisse economists note the strong start to payrolls has moderated

the last couple months and is "likely to continue" to do so. CS expects

"headline payrolls to come in at 170K for May," while the "unemployment rate

fell sharply in April to 3.9% and we expect it can maintain this low level in

May. Average hourly earnings are likely to rise 0.2% MoM, leaving the YoY growth

rate unchanged at 2.6%."

     Nomura economists, on the other hand "forecast a solid 205k nonfarm payroll

employment increase in May, with essentially all of the gain coming from private

employers. Incoming labor market data point to steady employment growth and a

still-low unemployment rate, consistent with our optimistic outlook for Q2 and

2018."

     Nomura said initial jobless claims should "remain subdued while the

four-week moving average of continuing unemployment insurance claims has

recently reached levels not seen since the early 1970s. We expect average hourly

earnings to increase 0.22% m-o-m, likely leaving the y-o-y rate unchanged at

2.6%."

     RBC economists are near the top end of expectations, looking for "payroll

growth to accelerate in May and have built in gains of 215,000 for both headline

and private NFPs."

     While labor markets continue to tighten, RBC adds, "cyclical participation

inching back towards the prior expansion highs, we expect wage growth will

continue to accelerate through the balance of 2018."

     Meanwhile, multiple Fed speakers will also be on tap as they rush to get

their opinion in ahead the next media blackout period starts Saturday June 2 and

goes through Thursday June 14, the day after the next FOMC announcement.

     Early Tuesday at 0040ET, St. Louis Federal Reserve Bank President James

Bullard will discuss the U.S. economy and monetary policy at the Japan Center

for International Finance's Global Finance Seminar, in Minato-ku, Tokyo, with

audience and media Q&A.

     At 1500ET Wednesday, Federal Reserve Board of Governors are scheduled to

hold an open meeting to discuss issuing a proposed rule for public comment on

modifying the "Volcker rule" in Washington.

     Federal Reserve Board of Governors will hold an open meeting at 1230ET

Thursday to discuss issuing a proposed rule for public comment on modifying the

"Volcker rule" in Washington.

     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 (prior, estimate): 

- May 29 StL Fed Pres Bullard, U.S. economy and mon/pol, Japan Center for Int

Finance's Global Finance Seminar, Minato-ku, Tokyo, audience & media Q&A 0040ET

- May 29 Mar Case-Shiller Home Price Index (0.8, --) 0900ET

- May 29 May Conference Board confidence (128.7, 128.0) 1000ET

- May 29 May Dallas Fed manufacturing index (21.8, --) 1030ET

- May 30 25-May MBA Mortgage Applications (-2.6%, --) 0700ET

- May 30 Apr ADP private payrolls (204k, --) 0815ET

- May 30 Q1 GDP (2nd) (2.3%, 2.3%) 0830ET

- May 30 Q1 GDP Price Index (2.0%, 2.0%) 0830ET

- May 30 Apr advance goods trade gap (-68.3b USD, --) 0830ET

- May 30 Apr advance wholesale inventories (0.5%, --) 0830ET

- May 30 Apr advance retail inventories (-0.4%, --) 0830ET

- May 30 26-May Redbook retail sales m/m (0.0%, --) 0855ET

- May 30 May help-wanted online ratio (1.24, --) 1000ET

- May 30 May Dallas Fed services index (14.5, --) 1030ET

- May 30 Fed Reserve Beige Book for upcoming June FOMC 1400ET

- May 30 Apr farm prices (4.5%, --) 1500ET

- May 31 Apr challenger layoff plans (-1.4%, --) 0730ET

- May 31 26-May jobless claims (234k, 223k) 0830ET  

- May 31 Apr personal income (0.3%, 0.3%) 0830ET

- May 31 Apr current dollar PCE (0.4%, 0.4%) 0830ET

- May 31 Apr total PCE price index (0.0%, --) 0830ET

- May 31 Apr core PCE price index (0.2%, 0.1%) 0830ET

- May 31 May ISM-Milwaukee Mfg Index (58.3, --) 0900ET

- May 31 May MNI Chicago PMI (57.6, 57.0) 0945ET

- May 31 27-May Bloomberg comfort index 0945ET

- May 31 Apr NAR pending home sales index (107.6, --) 1000ET

- May 31 25-May natural gas stocks w/w 1030ET

- May 31 25-May crude oil stocks ex. SPR w/w (+5.78m bbl, --) 1100ET

- May 31 Atl Fed Pres Bostic moderated Q&A, Florida Prosperity Partnership Tenth

Annual Statewide Training Conf, Orlando, 1230ET

- May 31 30-May Fed weekly securities holdings 1630ET

- Jun 01 May NA-made light vehicle sales SAAR (9.91m, 12.8m)

- Jun 01 May nonfarm payrolls (164k, 190k)) 0830ET

- Jun 01 May private payrolls (168k, 185k) 0830ET

- Jun 01 May unemployment rate (3.9%, 3.9%) 0830ET

- Jun 01 May average hourly earnings (0.1%, 0.2%) 0830ET

- Jun 01 May average workweek, all workers (34.5h, 34.5h) 0830ET

- Jun 01 May Markit Mfg Index (final) (56.6, --) 0945ET

- Jun 01 May ISM Manufacturing Index (57.3, 58.3) 1000ET

- Jun 01 Apr construction spending (-1.7%, 0.8%) 1000ET

- Jun 01 Q2 St. Louis Fed Real GDP Nowcast 1100ET

- Jun 01 Q2 NY Fed GDP Nowcast 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$]