Free Trial
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MACRO ANALYSIS
- US 10Y nominal yields have returned to pre-payrolls levels today (especially after the poorly received 10Y auction) with the retracement primarily led by real yields as inflation expectations see some greater reluctance to close the gap.
- It adds to what were already sizeable declines for inflation expectations prior to Friday’s payrolls report, with its surprisingly large rise in the unemployment rate to a level fractionally above the FOMC’s median long-run forecast.
- 5Y5Y inflation swaps for example have recently been sitting 1bp lower today at 2.44%, fading a $2/bbl lift in WTI (which shouldn’t have an impact on long-term inflation expectations but nevertheless can still do).
- They’ve lifted from Monday’s intraday lows of 2.30% (chart below shows end of day) but remain off the 2.48% pre-payrolls and ~2.55% earlier last week.
- Considering a trend 20-30bps spread between CPI and PCE, the PCE-equivalent moving closer to the 2% target might be ammunition for the more dovish FOMC members looking to ultimately return monetary policy to a more neutral setting, but it's unlikely to cause alarm bells at the Fed at current levels.
- It’s within the pre-pandemic range (albeit at the higher end), something that can’t be said for Eurozone 5Y5Y inflation swaps.
- The latter are much higher on a relative basis compared with pre-pandemic levels, even if at 2.18% they are only a little above the inflation target.
- We touched on how this recent decline in Eurozone inflation swaps is unlikely to herald a material acceleration in the rate at which the ECB eases monetary policy (see here).
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
We are facing technical issues, please contact our team.
ok
Your request was sent sucessfully! Our team will contact you soon.
ok