Steady Fed this week, but taper looms
April 26, 2021
–May treasury option expiration was uneventful on Friday with TYM settling 132-14, cash yield 1.565%, up 1 bp on the day. This week brings auctions of 2, 5 and 7 year notes. FOMC announcement is Wednesday. The Fed’s preferred measure of inflation, Core PCE prices, is released Friday, expected at 1.8%. An article on BBG says a survey of economists expects the Fed to begin to taper by Q4, with 14% looking for a Q3 start and 45% pegging Q4. The Jackson Hole symposium is late August, sometimes used as the forum for policy announcements. In eurodollars, the theme of buying puts/selling calls is again in vogue, 3EU 9800 put vs 9900 call traded another 28k Friday, with the put settling 7.5 and the call 4.75 vs EDU4 9851.5.
–On Friday, equities shrugged off Thursday’s weakness associated with the administration announcing a proposal to raise cap gains taxes to 39.6% for high earners. ESM closed 4171.50, the high settle of the week and just short of the previous week’s ath of 4176.30. Bitcoin has roared back above 50000 this morning. Apparently the market has little faith in Biden’s proposal actually becoming law.
–July Corn is up another 13 cents this morning to a new high 645. Grains have had a spectacular rally that shows no signs of abating.
–Italy ten year yield is 81.9 this morning, highest since last September.
