Good morning … Feels like markets are bracing, triangulating, ahead of “Liberation Day” (will this become a national, non-trading / working holiday?) it feels as though markets are grinding about, doing so very much AND nothing at all. The FOMC meeting has come and gone and while putting paid to couple of cuts (despite / because the facts and updated DOTS <GO>), the markets seem to believe in moar.
As the day starts and the week comes to a close, I’m gonna be brief and start with another look at ‘the belly’.
Something about the belly which keeps me coming back to review … a
5yy DAILY: triangulating range 4.03% - 3.93% …
… bottom of the triangle (3.93, TLINE, green) would also fit nicely into a technical narrative as momentum has gone from overSOLD cross and may very well become extended (overBOUGHT) down ‘round low 3.90s …
… And as the price action evolves, a good recap / rundown of the day that was yesterday, something I have come to read now daily as it offers to me some of the moment by moment recon having NOT witnessed it on my own Terminal …
Thursday, Mar 20, 2025 - 08:00 PM ZH: Post-Fed Hangover Hits Stocks As Trump Reminds Traders 'Liberation Day' Looms
… ...but a quick look at the 30Y yield's move today shows how wild it was with a 14bps swing lower from the FOMC statement yesterday and then an 8bps swing higher during today's US session...
Rate-cut expectations continued to rise (dovishly) today with 3 cuts now more likely than the 2 cuts The Fed confirmed in yesterday's dot-plot...
NEWSQUAWK US Market Open: US equity futures lower whilst USD gains ahead of Trump-Hegseth meeting … USTs are slightly firmer, in-fitting with action in Bunds as the risk tone remains under pressure this morning. US specifics a little light thus far though the docket ahead is packed. Firstly, POTUS is due to give remarks from the Oval Office at 15:00GMT alongside his Defence Secretary. Given Hegseth’s inclusion the remarks may be focussed on Iran, with rhetoric from the Supreme Leader this morning punchy. As it stands, USTs are at the upper-end of a 111-00 to 111-09 band, with yields softer across the curve which itself is incrementally steeper.
Finviz (for everything else I might have overlooked …)
Moving from some of the news to some of THE VIEWS you might be able to use… here’s some of what Global Wall St is sayin’ … including any FOMC recaps / victory laps straggling along and eventually stumbling their way into my view …
First UP, from THE bank of the land on the FOMC …
19 March 2025 BAML: March FOMC meeting: Plain vanilla with a drop of dovishness
The FOMC statement was little changed in March. The committee removed its language around risks to the dual mandate being roughly balanced, and added in narrative on the increased uncertainty around the economic outlook. The FOMC leaned even further into stagflation than we projected. Growth was marked down to 1.7% this year and 1.8% in the following two years. Inflation was also revised up for 2025, and the median dot plot forecasts were unchanged across the board. In the press conference, Chair Powell highlighted the stagflationary risks posed by policy changes out of Washington.
Rates: Rally on downside growth risks US rates heard a somewhat dovish Fed overall. Rates declined & the curve bull steepened likely due to increased emphasis on downside risks to growth & some downplaying of recent increase in some measures of inflation expectations. We encourage clients to be at worst neutral with building downside growth risks. On QT, the Fed slowed the pace of balance sheet reduction but by less than we expected. Overall, this should be supportive of front end spread widening from April to June as net UST supply to the public is negative…
The MPC voted 8-1 to hold Bank Rate at 4.5%, confirming it still sees a gradual easing in Bank Rate as appropriate from here. The minutes stressed uncertainty and put wages and inflation expectations at the fore for the coming months. We retain our view that Bank Rate will reach 3.5% by September.
… same shop on USAs used home sales …
20 March 2025 Barclays: February existing home sales post surprise increase despite strong mortgage rates
Existing home sales increased 4.2% m/m in February, to 4.26mn, after falling in the prior month. This contrasts with the persistent strong mortgage rates in December and January that are continuing to flow into the resale market.
… Overall sales are weaker than a year ago, down 1.2% y/y, driven down by weaker multi-family sales (-9.8% y/y) and single-family sales (-0.3% y/y). The decline in sales levels is a direct result of the sharp increases in house prices since the pandemic and elevated mortgage rates, which have priced many potential buyers out of the housing market, while mortgage lock-in effects have likely constrained supply…
… next up from best in the biz, a note on CLAIMS during the NFP survey week …
March 20, 2025 BMO: Jobless Claims 223k during NFP Survey Week; Philly Fed Beats; UST Retain Gains
Initial Jobless Claims printed at 223k in the week of March 15th (NFP survey week); in line with the 224k BBG consensus, and a 2k increase from the prior week's 221k. Continuing Claims came in at 1892k for the week of March 8th, 5k above the 1887k BBG consensus, albeit a 33k increase from last week's 1859k. At the state level, Initial Jobless Claims in the DMV area fell to 6,662 from 8,591 prior. Claims in DC declined to 1,290 from 1,536 previous, Maryland fell to 2,300 from 3,019 before, and Virginia decreased to 3,072 from 4,036 last. Initial Jobless Claims for Federal employees (UCFE series) in the week of March 8th declined to 1,066 vs. 1,580 prior. On the manufacturing side, the Philadelphia Fed Index declined to 12.5 vs. 18.1 prior, modestly outperforming the 9.0 BBG consensus. Within the details, Prices Paid rose to 48.3 from 40.5 (highest since July 2022), while Prices Received fell to 29.8 from 32.9. New Orders declined to 8.7 from 21.9, Shipments decreased to 2.0 from 26.3, and Number of Employees jumped to 19.7 from 5.3 (highest since Oct. '22)….
… and another as the day came to a close …
March 20, 2025 BMO Close: Reading Between the Dots
… Even though the Fed stuck by its 50 bp rate cut messaging for this year (and only 2 dots preventing the median from implying just one 25 bp cut), the futures market is pricing in 68 bp of rate cuts by year-end. This is 10+ bp more than what was priced in immediately before the FOMC. Moreover, the market-implied odds of a rate cut on June 18th have increased. 16 bp of cuts were priced in by that meeting in the run-up to the Fed, but now the market is pricing in 21 bp of rate cuts. While there is a case to be made that it could be misleading to use trading levels from immediately before the Fed as a reference point (given the market’s bias for a hawkish Fed), we’ll admit that we would have expected less conviction in Q2 cuts on the combination of a more hawkish skew in the dots and Powell’s comment that the Fed is ‘not in any hurry’ to adjust policy rates.
On that note, while our position remains in the money, the unrealized gains on our short position in July 2025 Federal Funds Futures FFN5 (entered Friday, March 14th at 95.925) have declined since the FOMC. We’ve tightened our stop level to 95.950 (from 96.025). Especially after seeing Powell’s efforts to downplay the weakness in the soft data, we suspect the market is making an overly optimistic assumption about the Fed’s ability and willingness to resume lowering policy rates by June 18th. As for our long position in 30-year bonds (entered Thursday, Match 6th at 4.60%), 4.50% has proven an obvious line in the sand, as the last two intraday forays below that level were short lived. We now see a double bottom in yield terms at 4.49%, one of several technical hurdles in the path toward our target of 4.40%. The others being the 200-day moving-average (4.464%), and March’s low yield mark of 4.421% …
… in this next note from a small French shop, more about Team Transitory …
20 Mar 2025 BNP: A “transitory” post FOMC reaction | US Rates Insights
KEY MESSAGES Treasuries and TIPS: We think the March FOMC wasn’t dovish per se, but disappointed compared with the hawkish market buildup into the meeting. However, with a “transitory” characterization of tariffs, the bar for pricing a hawkish Fed has increased significantly. We perceive the Fed as uncertain about the macro environment with no market trend emerging – the post FOMC market reaction will be “transitory” itself.
We close our 2s10s flatteners. We continue to suggest long 10y TIPS, with a higher conviction - as a trade that works in stagflation as well as a dovish Fed scenario.
Money markets: Even with a tapered QT, we think the Fed will ultimately end QT in July - before the TGA rebuild in the summer. Volatility: We think uncertainty about the economic outlook translates to higher certainty about a Fed pricing stuck around recent levels. We suggest selling 3m2y ATMF straddles vs. buying +/- 25bp strangles, and selling 6m2s10s curve vol.
… here a small German shop notes something I can relate and have often felt when trading / buying / selling / stratEgerizing with institutional FI investors travelling in USTs …
20 March 2025 DB: Analysis of the paralysis from trade policy uncertainty
Measures of trade policy uncertainty have soared to record highs in recent months. Beyond the mechanical impact of higher tariffs (see “Tariff thy neighbor”), the adverse effects of heightened uncertainty has triggered worries about a near-term slowdown or even a recession. We build on Fed staff work to gauge the impact of historical levels of trade policy uncertainty on the outlook.
We begin by replicating Fed staff analysis using their own measure of trade policy uncertainty. Our analysis confirms that spikes in trade policy uncertainty can exert a sizeable and sustained drag on economic activity. For example, the rise in trade policy uncertainty in 2018-19 is estimated to have shaved roughly 1 percentage point from the level of real GDP over that period, consistent with Fed estimates.
Extending this analysis to the recent period, we find that the recent rise in trade policy uncertainty could shave 0.75 percentage points from the level of GDP through mid-2026. However, that estimate is optimistic as it assumes uncertainty imminently retreats to normal levels. If trade policy uncertainty remains at these levels through June, the peak drag on activity could double, though the impact would be felt through the end of next year. Further extension of elevated trade policy uncertainty would imply even larger and longer negative effects on growth.
Importantly, we caution that the precise contours of the results are sensitive to the measure of trade policy uncertainty considered. Spikes in trade policy uncertainty are less persistent according to the Baker, Bloom and Davis (BBD) measure than the Fed's index. The adverse growth effects from an uncertainty shock could therefore be shorter-lived than the Fed staff's estimates indicate, even if the peak impact is more intense. We ultimately conclude that while recent uncertainty will undoubtedly exert a drag on growth this year, the exact impact of trade policy uncertainty remains uncertain.
… As far as rates go (lower and the trend resumed, noted HERE) …
20 March 2025 ING Rates Spark: Lower yield test, but there are limits
When we look at the market discount, we see US rate cuts anticipated. But we don't see a US recession discounted. For as long as the latter remains true, there is a minimal path for the US 10yr yield to get below 4%. That said, 2 April will see reciprocal tariffs coming from the US, and we'll need to see where the chips fall after that
… here’s a look at next week, economically speaking …
March 21, 2025 08:00 AM GMT MS US Economics Weekly: Look through inflation? Easier said than done.
The Fed signaled it was prepared to look through tariff-induced inflation and ease policy to support activity, if necessary. We agree this is the right idea, but may be hard to execute in practice, particularly for a Fed that is data dependent. We still expect cuts to be back-loaded.
Key takeaways
The Fed revised in the direction of lower growth and higher inflation; it sees risks to inflation to the upside and risks to activity to the downside.
Powell repeatedly said the Fed was prepared to keep policy where it is, or ease if activity softens. The reaction function is asymmetric.
A data-dependent Fed may find it hard to ease in the face of rising inflation. We keep a rate cut in June but continue to back-load cuts into 2026.
South Korean export data for early March recovered from lunar new year distortions. Export strength was led by ships and chips—more-consumer-oriented sectors were not so robust. The data is a positive signal for Korea, but does not perhaps say much about global demand as trade taxes increase.
Media are reporting US job losses from US President Trump’s trade taxes. Given political polarization, in some cases tariffs may be a convenient excuse for planned job cuts. However, low fear of unemployment supported economic strength over the past four years. If uncertainty starts to create fear of unemployment, a more significant downside risk to US growth will emerge…
… things like homes are ‘rich’ and as such, well, used home sales maybe NOT as good as they appeared in mirror …
March 20, 2025 Wells Fargo: Existing Home Sales Bounce Back in February Despite the Rebound, Affordability Constraints Continue to Weigh on Resales
Summary Home Buying Limited by Elevated Mortgage Rates and High Prices
Existing home sales beat expectations and rose 4.2% in February. The rebound from January's decline indicates poor weather may have temporarily depressed home buying at the start of the year. Through the monthly volatility, February's 4.26 million-unit pace of sales represents a 1.2% year-to-year decline. All told, resales continue to run at a slow pace on account of persistent affordability challenges. For more on our expectations for the residential sector, please see our latest outlook for the housing market published this week.
…finally, from the dr of bond vigilantes …
Mar 20, 2025 Yardeni: US Economy Is Still Resilient, But Tariffs Pose Risks
Today's batch of economic data releases was positive on balance but also suggests that Trump Tariff Turmoil 2.0 could dampen future growth. Stock prices seesawed between gains and losses, while Treasury yields slid a bit. Markets continue to suggest that economic growth outside of the US is increasingly likely to improve while downside risks to US growth are rising. As a result, US stock valuation multiples are falling closer to their international counterparts (charts).
The same can be said about the spread between US government bond yields and foreign ones (chart).
Still, the gaps in stock market multiples and sovereign bond yields in the US relative to overseas ones remain relatively wide. We expect they will remain so if US productivity growth continues to outpace productivity growth abroad, especially in Europe (chart). That’s our expectation.
… And from the Global Wall Street inbox TO the intertubes, a few curated links …
Ruh Roh …
March 20,2025 AAA: Gas Prices Make a U-Turn and Head Uphill
WASHINGTON, DC (March 20, 2025) – After weeks of little movement, the national average for a gallon of gas increased by about 4 cents since last week to $3.12. Even though the price of crude oil remains below $70 a barrel, prices at the pump are going up as more refineries make the seasonal switch to summer-blend gasoline. Summer-blend gas is less likely to evaporate in warmer temperatures and is more expensive to produce…
They say everyone’s got a right to an opinion, not their own set of facts …
March 20, 2025 at 11:30 PM EDT Bloomberg: T. Rowe Sees German Fiscal Push Emboldening 6% US Yield Call
(Bloomberg) -- T. Rowe Price sees Germany’s historic spending push as lending support to the money manager’s contrarian view that 10-year US Treasury yields will eventually reach 6%.
“Long-maturity developed market government bond yields are heading significantly higher” as Germany joins others vying to raise more debt, Arif Husain, the firm’s chief investment officer of fixed-income, wrote in a note. Benchmark Treasury yields may hit 6% over the next year and a half, according to the near three-decade market veteran who helps T. Rowe oversee $295 billion…
…“In the longer run, I believe there is a distinct path to higher bond yields and steeper curves as three of the major levers of the world economy — the US, Germany, and China — are all likely to provide stimulus to support their economies,” benefiting risk assets, he wrote.
AND before I go, in the case you picked up some of those eggs on the cheap …
https://youtu.be/AT7LzUtVTQ4?si=cYeN93vjFS0VppOh
Gundlach: Fed's Inertia Sparks Economic Anxiety
Fed Day commentary.....
Ahahaha. Very funny Florida cartoon