The inflation debate is likely to continue this week with the release of important US data and Fed speeches. The impact of the data flow on key Treasury auctions will be closely monitored.
US CPI for Mar will be reported this week. Data are likely to remain noisy as year-on-year comparisons start to cycle over the onset of the pandemic in 2020. The expectation is for annual growth in the headline CPI to increase from +1.7% in Feb to +2.5% in Mar. Annual growth in core CPI is expected to increase from +1.3% in Feb to +1.5% in Mar.
US retail sales for Mar will be released this week and are likely to reflect the impact of the third round of stimulus. Expecting substantial month-on-month growth of +5.5% in Mar.
US industrial production for Mar will also be released this week. Manufacturing output in Feb was impacted by severe weather shutting down some regional activity for several days. The Mar regional surveys reflect some rebound from that. We will also get the first view of Apr manufacturing momentum with several regional surveys out this week.
The University of Michigan will report the prelim consumer sentiment survey for Apr. So far, despite significant stimulus and the rollout of vaccines, US consumer sentiment has yet to retrace to pre-pandemic levels.
US Treasury auctions will be in focus – especially the 30yr Bond auction on Tuesday after the CPI print. The 3yr and 10yr Notes will be auctioned on Monday.
On top of the data flow, there will be several Fed speeches. Headline speeches include US Fed Chair Powell and Vice-Chair Clarida. Both speeches are scheduled for Wednesday after the CPI print – expect the Fed to maintain its position of tolerating higher inflation prints (“average 2% for some time”).
The Reserve Bank of NZ will meet on rates this week.
The remaining Mar data for China will be out this week – trade, retail sales, and industrial production. GDP for Q1 will also be released.
Finally, the Australian employment and labour market survey for Mar will be released this week. This is not yet likely to reflect the impact from the end of the Government JobKeeper support program at the end of Mar.
The new schedule of Fed purchases of US Treasuries and MBS will be released on Tuesday.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $386bn in ST Bills, Notes, and Bonds this week, raising approx. $40bn in new money for the week.
This week, approx. $36bn in ST Bills, Notes and Bonds, and TIPS 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
