Taking a Breath as Risk Sentiment Stabilizes !! Thinking about the US FED Rate decision ...

Risk sentiment stabilised overnight as 11 banks infused USD 30 bn of deposits into First Republic Bank and Treasury Secretary Janet Yellen told the Senate Finance Committee that "Americans can feel confident that their deposits will be there when they need them."

US Initial claims for the week ending Mar 11, 23 came in under the 200K level at 192K following a jump last week to 212K which was attributed to mid-winter school break. The steady print shows reluctance among employers to let labor force go. Continuing claims fell to 16.84mn from prior week number of 17.18 mn.

The residential construction report showed stronger than expected construction activity.

Building Permits: 1,52 mn (prior 1.34 mn)

Housing Starts: 1,45 mn (prior 1.32 mn)

Housing Completions: 1,557,000 (prior 1.39

The interest pricing gyrated with May 23 peak rate seen at 4.95% and dec 23 rate at 4.23% Yields on US Treasuries made low before closing the day higher. 2Y UST touched a low of 3.82% to close the session at 4.15% and the 10Y UST touched a low of 3.37% before closing the session at 3.58%.

US data continues to be strong on the one hand and recent banking turmoil weighs on the other hand.

In the 22 Mar 23 policy rate decision what would the Fed do?

If they do not hike, I think, it will be construed as Fed being extremely concerned about the current financial fragilities which could spark risk aversion. If they do make a "robust decision" like the ECB and hike by 50 bps, the market could think Fed is making a big time policy error and the 2x10 spread could widen. Following the extremely strong January economic data, the Feb data does not offer any deep insights. We have not seen any roaring economic strength in the month of Feb but the data has best been mixed. So the prudent thing, in my assessment and as also what is being priced in by the market will be a 25 bps hike in light of the recent events.

What are you thinking?

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The Moment of Reckoning is here !! 25 or 50 Bps and the SEP || Benign PCE Expectations || USDJPY 145.75 or 137.50 ??

“Every once in a while, an up-or-down-leg goes on for a long time and/or to a great extreme and people start to say "this time it's different." They cite the changes in geopolitics, institutions, technology or behaviour that have rendered the "old rules" obsolete. They make investment decisions that extrapolate the recent trend. And then it turns out that the old rules still apply and the cycle resumes. In the end, trees don't grow to the sky, and few things go to zero.” ~ Howard Marks Bonds continued to rally this week with yields on US2s printing a high and low range of 3.71% - 3.55% to close the week at 3.584% and US10s printing a high and low range of 3.76% - 3.6050% to close the week at 3.655%. I highlighted in my blogpost on Aug 31, the triangle breakout target at 15.50 bps on US2s10s. We dipped to -0.004% on the CPI release and closed the week at 0.0710%. On Crude Oil prices we dipped to lows of $ 68.71 but closed the week higher at $ 72.09. ECB annou...

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DXY holds 100.50 support| US2s10s Steepening persists| Economic Data at Cross Roads | Is more than 200 bps of Rate Cut space available?

As identified in the last blog post, USD Index made a low of 100.51 on Tuesday and retraced to close the week at 101.732 . I will be closely looking at how the price action evolves around the 102.50 levels to re-initiate shorts. In my post earlier, we identified the first braking zone to the downward momentum on USTs as the 3.64% - 3.81% zone where US2s found resistance. During the week, Yields on US2s dipped to 3.848% before closing the week at 3.92% inside of the 3.90% - 4.10% range seen for better part of the month. The steepening trend persisted this week as the US2s10s closed the week at -0.014%. On US10s, yields moved higher to close the week at 3.907%. I'm looking at 2 spots to re-initiate trades on US2s ~ 4.10% and 4.20% handle. The break in US2s10s outside of the triangle targets 15.50 bps. US economic data shows a softening trend but it does not outright suggests a sharp deceleration to warrant further pricing of rate cuts. The thought is predicated o...

Embedded Narrative - Soft Landing | Benign Inflation | US2s H&S in play | US2s10s bull steepening

One of my favorite poem is by Kahlil Gibran and thought I'd share a couple of lines with you all... Do not live half a life and do not die a half death If you accept, then express it bluntly, Do not mask it If you refuse then be clear about it for an ambiguous refusal is but a weak acceptance Do not accept half a solution, Do not believe half truths, Do not dream half a dream, Do not fantasize about half hopes To reach and not arrive, Work and not work The half is a mere moment of inability, but you are able for you are not half a being You are a whole that exists to live a life not half a life” On that note, quick weekly roundup for the US markets below: The Fed Fund Futures are pricing in 88% probability of a rate cut by September Policy. The Atlanta FED GDPNow Estimates for Q3 growth readings are running at 2.8%. The Cleveland Fed estimates for Core CPI and Core PCE are running at 0.27% and 0.22% respectively mom. In the last blog piece...

Shroedinger's Cat ~ Preparation is the Key to play markets || US Politics || Macro Musings

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Recalibration of Policy Stance | Ride in Risk Assets | Soft Landing | Close out US2s10s Bear Steepeners

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Chair Powell - Unequivocally Dovish at Jackson Hole ! Front and Centre Focus on Employment Numbers | USD Index at lower end of the 100.50 - 106.50 Range

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