Using the Yield Curve to Measure Taper Expectations
What’s in Today’s Report:
- Using the Yield Curve to Measures Taper Expectations
- Strong 2-Year Note Auction Implies a Dovish Powell
U.S. stock futures are slightly higher in very quiet trading this morning as investors assess the state of the pandemic against expectations about the Fed’s taper plans ahead of the Jackson Hole Economic Symposium later in the week.
Economically, the German Ifo Survey was slightly soft with the Business Climate headline falling to 99.4 vs. (E) 100.4 and Business Expectations declining to 97.5 vs. (E) 100.0.
Looking into today’s session, there is one economic report ahead of the bell: Durable Goods Orders (E: -0.2%, Core Capital Goods: +0.5%). As has been the case recently, the market will be looking for a report that is good enough to not suggest the recovery is losing momentum but not too strong that it would influence a sooner-than-later taper by the Fed.
As the day goes on, we will hear from one Fed official: Daly who is scheduled to speak at 1:00 p.m. ET however her comments should not move markets will focus already moving ahead to Powell’s speech on Friday.
Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET. If we see strong demand like we saw in yesterday’s 2-Year auction, then that could offer a modest, dovish tailwind to equities as it will suggest expectations for Powell’s speech are shifting more dovish.
Bottom line, there are a few potential market catalysts today, but the odds that the market makes a material move one way or another are low given the sense of Fed paralysis ahead of Powell’s speech on Friday.
