Central Bank Communication
September 23, 2020
–Little reaction to Powell yesterday. His prepared testimony emphasized the Fed’s lending function as a backstop, and said the Main Street program might not be appropriate for many COVID-impacted businesses, but that the Fed has done a lot to make general credit conditions looser. In my opinion he’s placing responsibility for targeted action on fiscal agents.
–Small changes in rates with tens down 0.5 to 66.4. New all-time 3m libor low yesterday at 0.22250. Euro$ curve was flat to +1.0 on light volume. New recent low in bond straddles with USZ 177^ settling 5’16, a full point lower than a week before, when USZ 176^ settled 6’16. The contract has traded between 173-16 to 178-16 for a month and a half.
–Markit PMIs today. The Composite was 54.6 last, which was a new high for 2020. More supply today with $22 billion in 2yr FRN and $53 billion five-years.
–“When inflation is stable and predictable, that’s the way to go.” I think that’s Powell’s message, but it’s communicated with a bit more panache by the Bank of Jamaica, which, by the way, is targeting 4 to 6%. If only we could get Ozzy to sing a little song to convince the public that inflation is going to run hot…
