Rate hikes questioned
October 26, 2021
–Yields eased yesterday, partially because the prospect of the BOE hiking next week was thrown into question. An BBG story from early yesterday said ‘Tenreyo suggests bank of England can wait to move on rates’. Andrew Bailey, who has recently signaled the BOE would act to contain inflation risks, is not likely to support a rate increase next week, according to HSBC. More immediately, the FT is running this headline before Thursday’s ECB meeting: “Lagarde set to push back on market bets of eurozone rate rise”.
On the eurodollar curve, the rally was led by reds, which closed +4.375. Greens +2.625, Blues +0.875 and Golds +0.125. Chicago Fed Nat’l Activity index also weaker than expected, coming in at -0.13. Today’s news includes New Home Sales and the Conference Board survey data. Consumer Confidence and the Expectations Index both fell in September, with the latter plunging to 86.6, apparently due to the delta variant. A further decline might corroborate weakening signals about Q3 GDP from the Atlanta Fed, though inflation shows no signs of abating. Auction of 2-yr notes today, followed by 5’s and 7’s on Wednesday and Thursday.
