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5 Mar 2014
Flash: US data on the spotlight today - Societe Generale
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, remarks today's US docket as highly relevant.
Key Quotes
"If the most important market event of the last year was the announcement that US monetary policy is starting to shift direction, then my conclusion is still that tapering is ‘priced in'. 2013 divides into three parts, with the pre-taper talk period, the summer sell-off and then the long period since the autumn when Treasury yields have been stuck in a range."
"The 1-year US rate, 5years forwards is my proxy for the market's best guess of neutral rates, and from 2.2% in May, it adjusted very fast to a 3.6-4.2% range, which corresponds neatly with the 2.5-3% range we see in 10-year Treasuries. The notion of a 3.5%-4% Fed Funds rate at some point in the future simply does not scare asset markets any more."
"The S&P has spiked to new highs as soon as geopolitical tensions eased, volatility remains low, credit spreads likewise. Yesterday's jump in Treasury yields reinforces the range in yields rather than signalling more, and there was enough weather-distortion in the labour market in February that we don't expect the rise in yields to go too far for now."
"We will watch ADP (exp +130k) services ISM (53.6) and the Beige Book, expecting to hear nothing which drives yields up, or stands in the way of the market's yield and risk-hungry mood. In FX, you get the biggest bang for your buck in a risk-friendly world by selling the yen, with MXNJPY the major pair most correlated with the S&P."
Key Quotes
"If the most important market event of the last year was the announcement that US monetary policy is starting to shift direction, then my conclusion is still that tapering is ‘priced in'. 2013 divides into three parts, with the pre-taper talk period, the summer sell-off and then the long period since the autumn when Treasury yields have been stuck in a range."
"The 1-year US rate, 5years forwards is my proxy for the market's best guess of neutral rates, and from 2.2% in May, it adjusted very fast to a 3.6-4.2% range, which corresponds neatly with the 2.5-3% range we see in 10-year Treasuries. The notion of a 3.5%-4% Fed Funds rate at some point in the future simply does not scare asset markets any more."
"The S&P has spiked to new highs as soon as geopolitical tensions eased, volatility remains low, credit spreads likewise. Yesterday's jump in Treasury yields reinforces the range in yields rather than signalling more, and there was enough weather-distortion in the labour market in February that we don't expect the rise in yields to go too far for now."
"We will watch ADP (exp +130k) services ISM (53.6) and the Beige Book, expecting to hear nothing which drives yields up, or stands in the way of the market's yield and risk-hungry mood. In FX, you get the biggest bang for your buck in a risk-friendly world by selling the yen, with MXNJPY the major pair most correlated with the S&P."