CPI and FOMC
June 12, 2024
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–CPI and FOMC today. CPI month/month +0.1 expected with Core +0.3. On a year/year basis headline expected 3.4% from 3.4% last and Core 3.5% from 3.6%.
–FOMC March 2024 ‘dot’ or estimate for end-of-2024 FF was 4.6% or three eases. Today that dot will either show 1 or 2 eases, my guess is 2 which would take the estimate to 4.9%. SFRZ4 settled at 9507 (4.93%) +2.5 on the day, so two eases would probably lead to some upside in the contract. Recent low settle was 9497 at the end of last month. SFRM4 is 9465.5 so one ease could roughly be estimated at 9490, but in my opinion it’s highly unlikely that SFRZ4 would test that level. The 2025 dot was 3.9 in March; that may have to push a bit higher as well. SFRZ5 settled 9590 or 4.1%. SFRZ4/Z5 one-year calendar settled -83, or approximately three eases over next year; the spread has been in a range of -68.5 to -84.5 over the past month.
–It’s not the Fed’s job to comment on the level of USD, but $/yen remains above 157, CNY is at the low of the year vs USD and Indian Rupee is also at a historic low. Dollar liabilities are getting harder to service. My guess is that weakening labor (notwithstanding last Friday’s report) and a strong dollar will result in a somewhat dovish press conference.
–Yields fell yesterday. Ten year auction was solidly received, the yield fell about 6.5 bps on the day to 4.402%. AAPL exploded through the upper end of the range, closing at 207.15, up 7.25%, adding somewhere around $200 billion in market cap. Overall liquidity conditions seem frothy.
