25 years of transitory
June 29, 2023
–Central bankers at the ECB conference continued to talk restraint, but SFR futures still closed higher on the day. However, prices have reversed and are near new cycle lows this morning. For example SFRU4 settled 9587, +7.0 but have exactly reversed that move, trading 9580 this morning. With respect to a question on monetary policy lags, BOJ’s Ueda said monetary policy has been easy in Japan for the past 25 years with no inflation. He jokingly added that perhaps the lag time is 25 years. *Nervous laughter from the crowd.
–All 23 banks passed the Fed’s stress tests. It will be interesting to see if the remaining 18 banks all pass next year.
–Final Q1 GDP numbers today. Fed’s preferred inflation data tomorrow, PCE prices. Headline expected 3.8% yoy from 4.4% last with Core unchanged at 4.7% yoy.
–Powell’s focus on Service inflation, which is more labor intensive, suggests that the Fed will continue restraint until unemployment rises appreciably
–This morning’s prelim data still shows that SFRU3 traded a staggering 951k contracts yesterday with a fall in open interest of 26k. The contract settled unchanged at 9463.5. Very odd.
