Waller sees strong jobs
August 3, 2021
–Ten year yield hit 1.15% and ended down 5.2 bps at 1.172% yesterday as ISM Mfg missed, coming in at a still-robust level of 59.5. Prices retreated to 85.7 from the near record 92.1 last. While inflation seems to have little to do with yields at this point, an article on ZH points out that “…according to word counts of corporate earnings transcripts by BofA’s Predictive Analytics team, mentions of ‘inflation’ on Q2 earnings calls topped 1Q levels and jumped to a record high.”
–Fed Governor Waller yesterday said he could support tapering as soon as September: “If the jobs reports come in as I think they’re going to…then in my view, with tapering, we should go early and fast.” In 2018, the amounts of securities that weren’t rolled was cut by $10 billion every three months as the Fed was actually cutting the size of the balance sheet. Now the goal is simply to slow the growth of the balance sheet at a time when there seems to be insatiable demand for treasuries. NFP is Friday, expected somewhere between 900k and 1 million.
–New recent lows on near eurodollar one-year calendar spreads. EDU’21/EDU’22 fell 1.5 to 12.5 and EDZ’21/EDZ’22 fell 2.5 to 20. EDZ2 settled 9962.5, exactly 25 below front EDU’21. Pricing one hike by the end of next year.
–Of course, the delta variant is one of the factors driving markets currently. How does it spread? Well, here’s a picture from Chicago’s Lollapalooza fest.
I guess you can either view this picture as a sign of pent-up demand and economic dynamism or a super-spreader risk. Rolling Stone has a photo slide show here:
https://www.rollingstone.com/music/music-pictures/lollapalooza-2021-photos-1204812/foo_7305c/
