This week is about central banks and more specifically, the FOMC meeting on Wednesday. We are looking for the Fed response to the rise in yields.
The run-up in yields over the last few weeks has been met with varying responses. The RBA moved deftly to get the 3yr yield back down and made clear forward guidance. In the US, on the back of further significant relief spending, solid data, and vaccination roll-out, US yields have been rising. There has been little push-back by Fed officials regarding the increase over recent weeks.
While low short-term rates have been targeted by central banks, the focus may arguably shift to the rise in the 10yr yield – a rise in which places pressure on the pace of the recovery.
The FOMC will also need to address the looming deadline to reinstate or extend the exemption of, the Supplementary Leverage Ratio (SLR) for banks by 31 Mar.
Other central bank meetings this week include the BoJ and the BoE. The latest RBA meeting minutes will be released this week. There will also be several EM central bank meetings this week (Turkey, Brazil, Russia, Indonesia) – and rising US yields place pressure on these economies.
Other important data releases this week include US retail sales for Feb, US industrial production for Feb, and the Australian labour market survey for Feb.
The US Fed will purchase at least $11.9bn in US Treasury securities (last week $19.4bn). The Fed will also purchase at least $27.2bn in MBS ($28.8bn last week).
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $361bn in ST Bills, Notes, and Bonds this week, raising approx. $55bn in new money.
The US Treasury will auction the 10yr TIPS and 20yr Bond this week ($37bn) which will settle on 31 Mar.
This week, approx. $23bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
