Making Sense

The Fed Fund Pricing for cumulative rate cuts into 2024 shifted from last week's high of -34 bps to -46 bps and US2s10s bull steepened 2.50 bps over the week. US10Y yields were down 18 bps over the week with 10Y inflation indexed bonds driving gains of 12 bps and the 10Y break even inflation rate driving gains of 6 bps over the week. DXY found resistance at the 106.50 levels and came tumbling down to end the week at 105.08. JPY rallied on BoJ intervention while crude oil prices declined sharply to a 7 week low on an unexpected rise in U.S Crude Inventories. ___________________________________________________________ This week saw significant gyrations in risk assets. The post looks at data in 2 bits - Employment Data and the PMI Data. The data began the week with the Employment Cost Index rising 1.2% QoQ followed by the ADP Employment Change which showed private payrolls increase by 192K and 3m average at 192K. The Jobless claims data had no surprises with claims at very low lev...

 "We have two classes of forecasters: Those who don't know - and those who don't know they don't know" We had 3 data releases out of the US yesterday. Snapshots below: 1. Jobless Claims data – The week reflected annual revisions to the seasonal adjustment factors 2. Retail Sales data – Retail Sales Control was flat mom following an upward revision of 10bps to prior month’s figure of -0.40%. The control group is all sales, excluding receipts from auto dealers, building-materials retailers, gas stations, office supply stores, mobile homes and tobacco stores that feeds into the GDP.  The Atlanta Fed GDPnow estimates Q1 GDP at 2.30% from prior 2.5%. 3. The most important print out yesterday was the PPI report which stoked inflationary concerns after the strong CPI data. The rise in Core Goods CPI was also seen in Goods PPI which rose a 1.21% mom and surge in Energy which rose 4.35% mom. The estimates of core PCE deflator following the PPI report suggest ...

For India, WPI rose 0.27% mom with Food masking the otherwise deceleration in prices of non food article / Fuel and Power / Manufactured Products. System Liquidity Deficit stood at Inr 224K crore and WACR traded at 6.69%.  The Governor of the Reserve Bank of India met with senior management from Public and Private Sector Banks, emphasizing vigilance in areas such as risk management, customer protection, and financial stability. Yield on IN10s opened lower at 7.10% after the 7.14% peak seen yesterday.  US yields pulled back sharply which could be attributed to the Fed Speakers dovish tone / lower Dec PPI revision and expectations of a softer PCE reading. S&P lifted off lows to close 0.90% higher on the day. The market is currently pricing in 97 bps of rate cuts into 2024.  Yields High Low Close DoD ▲ US 2Y          4.67      ...