Monthly Archives: June 2013

Markets’ Interpretation, Not Message, Key to Today’s FOMC Releases

Fed Chairman Bernanke

U.S. stock futures are little changed this morning ahead of today’s FOMC releases at 2pm EST and Bernanke’s news conference at 2:30pm. Overnight the currency markets experienced only modest price changes, with the dollar index down nearly -0.1% and the euro just slightly higher. Bank of America’s Corporate Master Index OAS (option adjusted spread) rose to a YTD high of 158bps after $5B (corporates) priced yesterday (explanation here). Copper is trading modestly lower at -0.3%, while natural gas is extending gains by +0.8% to $3.937; crude oil is even on the day. Treasuries overnight held steady, but recently yields started moving lower with tens down -2bps on the day to 2.17%. Investors today awaiting the Fed’s policy statement and economic projects are looking for details on whether/when the Fed believes the economy is strong enough for the central bank to begin tapering its current open market bond purchases. The market’s response is likely to depend on the smaller details of Bernanke’s press conference, just as it did on May 22 when in a response to questions before congress he mentioned a hypothetical hawkish scenario, stating that it was possible the Fed could scale back stimulus if economic conditions warrant it. Projections for U.S. economic growth are likely to be cut back close to the median of many private economists.

It’s All About The Fed

The yen is weakening for a second day versus the dollar as euro-area stocks decline, with the Euro Stoxx 50 lower by -0.11% and S&P 500 front-month futures nearly even on the day. Treasuries are steady as the FOMC begins its two-day meeting, while the dollar is strengthening versus the majority of its peers. Copper is off by -1.3%, while crude oil and natural gas are climbing +0.34% and +0.6% respectively; gold is trading lower by -0.75%. There isn’t much to say until after the conclusion of the FOMC meeting tomorrow, only that sentiment appears slightly weaker this morning.

Sentiment Higher with Market’s Eye on FOMC

Things are relatively quiet on the news front this morning with investors positioning themselves ahead of this week’s FOMC decision, which will likely come alongside a cut to their 2013 growth projections. Sentiment is generally higher and classic risk-on trades on dominating in early trading, with most stocks, developed country bond yields, and risk currencies higher while the yen weakened after its biggest weekly advance in four years. Natural gas is rebounding, up +2% on the day to $3.8, while crude oil is higher by +0.4%; copper sold-off overnight and is off by -0.44%. U.S. Treasuries were steady overnight, with tens trading at 2.11%.