Making Sense

Overnight, US2s10s saw 6 bps of flattening as US Consumer Confidence and JOLTS data surprised on the upside. The Consumer Confidence increased to levels not seen since end of 2021 and the JOLTS Job openings data showed openings at 9.026 mn with vacancy rate at 5.30%. All eyes today will be on the FOMC Rate Decision and Powell's press conference.  Yields High Low Close DoD ▲ US 2Y          4.39          4.30          4.34                 1.70 US10Y          4.10          4.03          4.03      ...

 USD Index consolidated sideways marking a peak of 103.824. The U.S. Treasury said it expects to borrow $ 760 bn in Q1 , $ 55 bn lower than Oct estimates assuming a cash balance of $ 750 bn at the end of March and it expects to borrow $ 202 bn in Q2 assuming an end of quarter cash balance of $ 750 bn. Crude Prices fell overnight despite the geopolitical angst after reaching a high of $ 84.10 to close the day 1.3% lower. Ahead of the FOMC meeting, expect sideways price action in the USD index. Yields High Low Close DoD ▲ US 2Y          4.35          4.30          4.32                -3.30 US10Y          4.15   ...

On the EURUSD Trade initiated on Jan 24,  shorts initiated at 1.0900 level   (update 2)  exit 75% of the position for 100 pips of profit and on the balance 25% we trail our SL to 1.0855 and move our TP Target to 1.0765

"The correctness of a decision cannot be judged from the outcome. Nevertheless, that's how people assess it. A good decision is one that's optimal at the time it's made, when the future is by definition unknown. Thus, correct decisions are often unsuccessful and vice versa" On Friday, U.S. PCE numbers came in line with consensus expectations rising 2.60% yoy and the Core PCE rose 2.93% yoy. The 3m and the 6m annualized rate is now below 2%.  Snapshot ▲ YoY ▲ MoM ▲ 3M Change ▲ 6m Change Headline PCE 2.60% 0.16% 0.51% 2.00% Core PCE 2.93% 0.17% 1.51% 1.85% Headline CPI 3.30% 0.30% 1.78% 3.30% Core CPI 3.90% 0.31% 3.29% 3.18% Pending Home Sales rose 8.30% mom from prior -0.30% and 1.30% yoy from prior -5.20%. The market impli...

Stream of data out of the U.S.  Durable Goods orders were flat below consensus est of 1.10% Durable Goods Ex-transport rose 0.60%  Q4 Advance GDP Est showed growth at 3.30% However, the GDP deflator came in at 1.50% below consensus of 2.30% Initial Jobless Claims rose 214K above consensus of 200K, higher than exp but the Labor Market is holding up well. USD is softening post the release and US yields on 2Y are down from day's high of 4.415% to now 4.36%. No significant repricing seen on Fed Fund Futures. The data out of U.S clearly points to a SOFT LANDING narrative coming to fruition.

 EURUSD is rangebound post the ECB Decision holding 1.0900 resistance and 1.0870 support. Policy Rates Unchanged Inflation - Aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued Tight financing conditions are dampening demand, and this is helping to push down inflation. Future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary. The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. PEPP Program =  reinvest, in full, the principal payments from maturing securities purchased under the PEPP during the first half of 2024.Over the second half of the year, it intends to reduce the PEPP portfolio by €7.5 billion per month on average. The Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024. The next 1 hour is likely to be vol...

The Federal Reserve Bank had announced a Bank Term Funding Program as a result of the crisis at SVB Bank and Signature Bank.  An additional funding facility was made available - " Bank Term Funding Program (BTFP)" - to eligible depository institutions to help meet the funding needs of all their depositors.  The facility will offer loans of upto 1Y pledging US Treasuries, Agency Debt, MBS and other qualifying assets. These assets will be valued at par. Key Features: 1. Cease to make new loans on Mar 11, 24 and Ready access through the Discount window will be made available to banks at the current upper ceiling rate of 5.50%. 2. At the time of Facility introduction - The rate for term advances was at the one-year overnight index swap rate plus 10 basis point (currently - 1Y OIS Rate 4.81+0.10) which has now been revised to be "not lower than Interest Rate on Reserve Balances". The BTFP window offered banks a good arbitrage opportunity as the Funds borrowed th...

US equities posted a fresh high of 4908 which is the AB=CD completion target ( refer to post from yesterday ) as the Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) continue to pull S&P to fresh record highs and Netflix added 13.10 net new paid subscribers. After the PBoC CRR cut , Risk sentiment improved and U.S Yields were broadly lower. However, post the release of the U.S PMI numbers , US yields surged. The Fed fund pricing moved by 2 bp s with cumulative December rate cuts seen at 135 bps from 137 bps yesterday.  Flash US PMI Composite Output Index at 52.3 prior 50.9 -  7-month high Flash US Services Business Activity Index at 52.9, prior 51.4 -  7-month high Flash US Manufacturing Output Index at 48.7 prior 48.1 -  2-month high Flash US Manufacturing PMI at 50.3 Prior 47.9 -  15-month high Yields High Low Close DoD ▲ US 2Y      ...