Stretching it out
April 17, 2025
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–Not now…later. That’s the markets interpretation of Fed policy, and it didn’t change after Powell’s comments yesterday. For example, SFRM5/SFRM6 one-year calendar settled down 6.5 bps at a new low close of -87.5 (M5 9592.5, unch’d and M6 9680.0, +6.5). Just over three months ago on Jan 13 it settled nearly positive at -1.5. In another example, FFN5 settled 9588.0 down 1 on the day. But FFX5 settled 9641.5, +2.5. Current EFFR is 4.33 or 9567. FFN5 encompasses both the May and June FOMCs, but there’s not even one full 25 bp ease being priced. That’s just stupid. November, FFX5, is a ‘clean’ month with no meetings. The July 30, Sept 17 and Oct 29 FOMC meetings precede the contract and it’s 9641.5 or 3.585%, just 74.5 bps below the current EFFR. Anyway, the eases are being gently pushed forward in time.
–Stocks, which were already lower on the day, reacted negatively to Powell. SPX down 2.4% and Nasdaq Comp down a bit over 3%.
–A quote from MNI:
Powell says “I do think we’ll be moving away from” the dual mandate goals “probably for the balance of this year. Or at least not making any progress, and then we’ll resume that progress as we can.” He repeats that “the tariffs are larger than than forecasters had expected, certainly larger than we expected, even in our upside case.”
–Of course, a BBG headline this morning blares: Trump says Powell’s termination ‘Cannot Come Fast Enough’. In my opinion, an ease is, or will shortly be, justified. The market thinks so as well. But Trump is likely pushing it even farther out.
–From new NY Fed Business Leaders Survey
(responses collected between April 2 and 9)
“The business climate index dropped nine points to -60.7, its lowest level in more than four years, suggesting the business climate was considerably worse than normal.”
–Just an update on Corn priced in gold. If the world used REAL money we’re in severe deflation.
https://www.newyorkfed.org/survey/business_leaders/bls_overview
