Red Dot State of Mind - The Week Ahead
- Courriel
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Signet
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Imprimer
Disponible en anglais seulement
Ian Lyngen and Ben Jeffery bring you their thoughts on the U.S. Rates market for the upcoming week of November 14th, 2022, and respond to questions submitted by listeners and clients.
Follow us on Apple Podcasts, Google Podcasts, Stitcher and Spotify or your preferred podcast provider.
About Macro Horizons
BMO's Fixed Income, Currencies, and Commodities (FICC) Macro Strategy group and other special guests provide weekly and monthly updates on the FICC markets through three Macro Horizons channels; US Rates - The Week Ahead, Monthly Roundtable and High Quality Credit Spreads.
Ian Lyngen:
This is Macro Horizons episode 197, Red Dot State of Mind, presented by BMO Capital Markets. I'm your host, Ian Lyngen, here with Ben Jeffery to bring you our thoughts from the trading desk for the upcoming week of November 14th. Friday is a holiday in the bond market, but not in equities, further reinforcing our career decisions. Although let's face it, we were never going to be optimistic enough to make it in stocks anyway.
Each week we offer an updated view on the US rates market and a bad joke or two. But more importantly, the show is centered on responding directly to questions submitted by listeners and clients. We also end each show with our musings on the week ahead. Please feel free to reach out on Bloomberg or email me at Ian.Lyngen@bmo.com with questions for future episodes. We value your input and hope to keep the show as interactive as possible. That being said, let's get started. In the week just passed, the Treasury market rallied significantly on Thursday as a function of the lower than expected core CPI print.
By way of a quick recap, core CPI printed up just 0.272%, which was far under the 0.5% consensus. This conformed broadly with the peak inflation narrative and to some extent has been anticipated by market participants for some time. Frankly, it was the August and September core figures that were the bigger surprise and is what has led the Fed to increase their estimate of the terminal policy rate for this cycle. The post CPI price action was notable insofar as all of the benchmarks rallied. In some cases, the move was over 25 basis points. 10-year yields fell slightly below effective Fed funds, which is 383, a fact that brings into question how the curve will behave between now and the end of the year.
If we see two-year yields dragged higher by the next 50 basis point rate hike in December, it follows intuitively that we'll see a return of the deeper inversion narrative. For the time being, however, the market seems content to bring forward what we anticipate will be the big trade of 2023, and that is the cyclical bull steepening of the curve. Now, all the post CPI incoming Fed speak has reinforced that there is still more work to be done to keep forward inflation expectations well anchored, and that implies several more rate hikes from here. The path of least resistance, the Fed funds futures market at the moment suggests 50 basis points in December, 25 in February, 25 in March, and a reassessment at that stage.
That would bring effective Fed funds to 4.83. The question then returns, should that be the lower bound for two-year rates? Especially given the fact that the Fed will signal their intention of keeping policy rates elevated for an extended period of time. All that being said, there's certainly room for 5s, 10s, and 30s to rally from here, even in an environment where there's potentially another hundred basis points of rate hikes yet to be realized before the Fed chooses to go on hold. As is so often the case in financial markets, investors are attempting to get ahead of the next big move, an inclination for which we certainly have a fair amount of sympathy.
The balance of risks as we see them between now and the end of the year is that the longer end of the market continues to rally despite what we expect to be a decidedly hawkish tone from incoming Fed speakers as officials attempt to push back against the market's pricing in of a policy pivot.
Ben Jeffery:
Well, Ian, it's been a long short week and really it was always going to be a trading environment when the only thing that mattered was Thursday's inflation data. Sure, we got an impressive tail at the 10-year auction on Wednesday, but really the biggest takeaway was that October CPI print came in meaningfully below expectations with details that supported the peak inflation narrative, and that in turn brought 10-year yields decidedly back through 4% and even through 3.90 as buying interest in Treasuries picked up heading into the long weekend.
Ian Lyngen:
The moves were very sharp. We saw most sectors across the curve rallying by 25 basis points or more intraday, and that's meaningful given that this was the first significant miss that we've had on core CPI over the course of the last several months. Core CPI on an unrounded basis printed at 0.272% for the month of October. Consensus was for effectively double that at 0.5%. As a result, the year over year pace declined to 6.3 from 6.6. Now, that's the lowest since July and is very consistent with the notion that the prior Fed rate hikes have begun to have an impact on the real economy and realized consumer price inflation.
Owners equivalent rent also decelerated slightly, still above the norm, but printed at +0.6 versus +0.8 in September. Used car and truck prices declined 2.4%, and that's on top of the -1.1% in the prior month. Overall, the sentiment reflected in the Treasury market was one of renewed confidence that the Fed has made significant progress in its fight to keep forward inflation expectations well anchored.
Ben Jeffery:
Outside of the reaction in the longer end of the curve and 10-year yields, it was also extremely notable what we saw in the Fed Funds futures curve, specifically terminal pricing, and what was a very well entrenched expectation that terminal this cycle will be a 525 upper bound. That was before the CPI numbers hit. And after the data was in hand, we got a full 25 basis point rate hike pulled out of those valuations. Now the futures market shows an upper bound at 5%, but more immediately relevant is what this means for December's Fed meeting, specifically the debate between a 50 or 75 basis point rate hike.
And while yes, October's data is just a single month, the disappointment we saw Thursday morning all but takes another 75 basis point hike in December off the table. As we heard from The Wall Street Journal immediately following CPI, 50 basis points should be the operating assumption going into the last Fed meeting of this year.
Ian Lyngen:
Also keep in mind that we will get another CPI print before the Fed decision in December. It is certainly conceivable that if we see another lower than expected print in core terms, that the debate could shift to 50 versus 25. That certainly at this stage should be on the radar as a potential outcome.
Ben Jeffery:
And beyond December, the next phase of trading the Fed is likely going to be not how many additional 50 basis point moves we get, but how many quarter point hikes will be realized in the early part of 2023. At this point, a reasonable base case is at least one in February. If not necessarily, an additional quarter point move in March. But given we have four additional inflation prints between now and the March meeting, that is going to be, to quote Powell, data dependent. As for what this means for the level of rates in the front end of the curve, the argument can now be more compellingly made that the yield peaks and benchmark Treasuries are in.
We're transitioning to the point where investors are going to be less willing to sell rallies and more willing to buy dips. Now obviously a major theme of 2022 has been real money accounts decidedly underweight duration. And now that we've seen that bias move back toward neutral, the next step in that logical path is moving to overweight duration in an environment where the economy is beginning to slow and the lagged impact of the Fed's hikes are beginning to show up more materially.
Ian Lyngen:
Another important milestone that we've seen in the Treasury market in the wake of the October CPI data was the rally in 10-year yields brought the benchmark through the effective Fed Funds rate. Now, this is a dynamic that we had on our radar for this period between the November and December meetings. The fact that this occurred based solely on a single inflation print is somewhat surprising. However, with effective Fed Funds currently at 3.83, the fact that 10s got as low as 3.825 does set up for a meaningful challenge of the narrative that effective Fed Funds should function as a floor for Treasury yields up until the point the Fed is done hiking.
Now, clearly the next 50 basis point rate hike in December will push rates well through effective at least further out in the curve. What remains to be seen is whether the two-year sector will use effective Fed Funds as a floor. All else being equal, we do think that that will hold as a floor into the end of the year. It's not until the market can see the final hike, which will presumably be in March, if not May, that we would expect the two-year sector to begin to outperform versus funds.
Ben Jeffery:
While we've talked a lot about the ongoing flattening potential of 2s/10s, we've reached the point in the cycle when flattening in 5s/30s is becoming less clear cut. One way to think about this uncertainty is really the degree of clarity we're going to have on the path of interest rates over the next five years, which in the post-pandemic world gets back to the question whether the shock brought on by COVID really ushered in a more structural change to the economy. Is inflation durably higher?
Do policy rates need to be more sustainably elevated? Ian, as you touched on, now that we are approaching the end of the hiking cycle, what version of policy easing needs to be incorporated into rate assumptions on the other side of 2023 and into 2024 and beyond? What does that mean for the steepening potential of 5s/30s as the economic data begins to roll over more significantly?
Ian Lyngen:
Our take has always been that the dislocations created by the pandemic were going to take much longer to work through the system, but ultimately, the post pandemic world won't be all that much different from before 2020. The notion that a push for fringe shoring and onshoring the manufacturing sector was going to ultimately lead to a sustainably higher wage inflation environment as inflation expectations become embedded in the economy only resonated on a temporary basis.
One of the reasons for this has been the Fed's commitment to the 2% inflation target. As long as the Fed is committed to returning inflation to 2%, even if the strength of the jobs market might otherwise have led workers to anticipate further wage gains on a forward basis, the reality is that the Fed's willing to endure enough demand destruction to make 2% happen.
Ben Jeffery:
And despite our and the market's latest focus on the disappointing CPI print, let's not forget what we saw last week in the jobs numbers. Another unquestionably strong read on hiring in October. And despite headlines to the contrary, even the jobless claims figures continue to show that the labor market overall remains in a very strong place. The participation rate still has room to increase. And while this strength will likely not keep the Fed hiking through the entirety of next year, it will provide Powell the excuse to not deliver rate cuts as soon as would otherwise be expected.
Given that even in an environment when inflation starts to decelerate more materially, we're still going to be a great distance from that 2% inflation target and the labor market still has ample room to give before the job side of the dual mandate will start to become a more important input than inflation into the Fed's calculus.
Ian Lyngen:
Recall, Ben, that we did see an increase in the unemployment rate, however, a two-tenths of a percent gain to 3.7% from 3.5%. That occurred with a decline in the number of jobs reported by the household survey. We made the observation at that point, and I still think that it's relevant, and that is we only tend to see a divergence between the headline nonfarm payrolls from the establishment survey and the change in jobs reported on the household level when there's an inflection. In this case, we're anticipating that the inflection is going to be toward a weaker labor market in 2023.
Now, to a large extent, that is by design because the Fed is actively attempting to put the brakes on the real economy to regain some of its lost credibility as an inflation fighter, but this is the area that we've identified as having the highest potential to indicate the Fed has overshot on the tightening side. We have a lot of confidence in the Fed's ability to move the unemployment rate from 3.5% to 4.5%, but much less confidence in their ability to stop the unemployment rate from going to 5.5% or 6%.
Ben Jeffery:
Ian, to put that risk you emphasized in a different terminology, central banks have a poor track record of engineering soft landings. It's this narrative that's going to be the defining trend of 2023, a worsening labor market, a lower growth environment, moderating wages, all with the global backdrop of the issues facing Europe as a result of the war in Ukraine and inflation, simmering geopolitical tensions in East Asia, and all of that will reinforce this safe haven dip buying bias that we'll argue has started to materialize over the past few weeks.
Ian Lyngen:
Well, at least it's materializing somewhere. Sorry, crypto.
In the week ahead, financial markets will continue to digest the downshift in core inflation and the implications for monetary policy makers not only in the US, but also globally. The economic data highlight will be Wednesday's retail sales numbers. We're anticipating a 1.1% increase in sales during the month of October, but we'll also get housing starts and permits data, as well as existing home sales on Friday. All of this with the backdrop of a variety of Fed speakers, including Williams, Harker, Jefferson, and Kashkari.
As we've heard so far, the Fed will not be dissuaded from a 50 basis point hike in December simply based on one weaker than expected core number, particularly as the downshift is consistent with the Fed's objective and we continue to see relative strength in the employment market. Now, as we've lamented, once momentum begins to shift in the employment landscape, we're concerned that the move might run too far. We also get the PPI data for October. But given that it follows CPI, it will be far less impactful for policy expectations we suspect.
Similarly, Wednesday's release of import prices for October will be more of a background factor reinforcing some of the moderation that we saw on the consumer price side. From a supply perspective, $15 billion, 20 years on Wednesday should require something of a concession if not outright, then at least on the curve. We also have Wednesday's $15 billion 10-year TIPS auction. Underwriting inflation protected securities in the current environment hasn't been a particular issue given the emphasis on the outperformance of inflation. At some point, there might be a wane in demand. But with year over year headline inflation still running at 7.7%, we're doubtful that it will be this year.
As we enter the latter half of November, we're reminded of the liquidity strains that are already evident in the Treasury market and the potential for those to exaggerate as the year end turn comes to fruition. If we are going to see any pre year end shift in the SLR, it will need to be announced sooner rather than later so the market can incorporate any changes. We've reached the point in this week's episode where we'd like to offer our sincere thanks and condolences to anyone who has managed to make it this far. Note that we do see the University of Michigan's Consumer Sentiment Report on Friday despite the bond market's closure.
Equity traders will be in to respond to the release, implying better sentiment in bonds than in stocks by definition. Thanks for listening to Macro Horizons. Please visit us at bmocm.com/macrohorizons. As we aspire to keep our strategy effort as interactive as possible, we'd love to hear what you thought of today's episode. Please email me directly with any feedback at ian.lyngen@bmo.com. You can listen to this show and subscribe on Apple Podcasts or your favorite podcast provider. This show and resources are supported by our team here at BMO, including the FICC Macro Strategy Group and BMO's marketing team. This show has been produced and edited by Puddle Creative.
Voiceover:
The views expressed here are those of the participants and not those of BMO Capital Markets, its affiliates or subsidiaries. For full legal disclosure, visit bmocm.com/macrohorizons/legal.
Red Dot State of Mind - The Week Ahead
Directeur général et chef, Stratégie de taux des titres en dollars US
Ian Lyngen est directeur général et chef, Stratégie de taux des titres en dollars US au sein de l’équipe Stratégie de titre…
Spécialiste en stratégie, taux américains, titres à revenu fixe
Ben Jeffery est spécialiste en stratégie au sein de l’équipe responsable de la stratégie sur les taux américains de BM…
Ian Lyngen est directeur général et chef, Stratégie de taux des titres en dollars US au sein de l’équipe Stratégie de titre…
VOIR LE PROFIL COMPLETBen Jeffery est spécialiste en stratégie au sein de l’équipe responsable de la stratégie sur les taux américains de BM…
VOIR LE PROFIL COMPLET- Temps de lecture
- Écouter Arrêter
- Agrandir | Réduire le texte
Disponible en anglais seulement
Ian Lyngen and Ben Jeffery bring you their thoughts on the U.S. Rates market for the upcoming week of November 14th, 2022, and respond to questions submitted by listeners and clients.
Follow us on Apple Podcasts, Google Podcasts, Stitcher and Spotify or your preferred podcast provider.
About Macro Horizons
BMO's Fixed Income, Currencies, and Commodities (FICC) Macro Strategy group and other special guests provide weekly and monthly updates on the FICC markets through three Macro Horizons channels; US Rates - The Week Ahead, Monthly Roundtable and High Quality Credit Spreads.
Ian Lyngen:
This is Macro Horizons episode 197, Red Dot State of Mind, presented by BMO Capital Markets. I'm your host, Ian Lyngen, here with Ben Jeffery to bring you our thoughts from the trading desk for the upcoming week of November 14th. Friday is a holiday in the bond market, but not in equities, further reinforcing our career decisions. Although let's face it, we were never going to be optimistic enough to make it in stocks anyway.
Each week we offer an updated view on the US rates market and a bad joke or two. But more importantly, the show is centered on responding directly to questions submitted by listeners and clients. We also end each show with our musings on the week ahead. Please feel free to reach out on Bloomberg or email me at Ian.Lyngen@bmo.com with questions for future episodes. We value your input and hope to keep the show as interactive as possible. That being said, let's get started. In the week just passed, the Treasury market rallied significantly on Thursday as a function of the lower than expected core CPI print.
By way of a quick recap, core CPI printed up just 0.272%, which was far under the 0.5% consensus. This conformed broadly with the peak inflation narrative and to some extent has been anticipated by market participants for some time. Frankly, it was the August and September core figures that were the bigger surprise and is what has led the Fed to increase their estimate of the terminal policy rate for this cycle. The post CPI price action was notable insofar as all of the benchmarks rallied. In some cases, the move was over 25 basis points. 10-year yields fell slightly below effective Fed funds, which is 383, a fact that brings into question how the curve will behave between now and the end of the year.
If we see two-year yields dragged higher by the next 50 basis point rate hike in December, it follows intuitively that we'll see a return of the deeper inversion narrative. For the time being, however, the market seems content to bring forward what we anticipate will be the big trade of 2023, and that is the cyclical bull steepening of the curve. Now, all the post CPI incoming Fed speak has reinforced that there is still more work to be done to keep forward inflation expectations well anchored, and that implies several more rate hikes from here. The path of least resistance, the Fed funds futures market at the moment suggests 50 basis points in December, 25 in February, 25 in March, and a reassessment at that stage.
That would bring effective Fed funds to 4.83. The question then returns, should that be the lower bound for two-year rates? Especially given the fact that the Fed will signal their intention of keeping policy rates elevated for an extended period of time. All that being said, there's certainly room for 5s, 10s, and 30s to rally from here, even in an environment where there's potentially another hundred basis points of rate hikes yet to be realized before the Fed chooses to go on hold. As is so often the case in financial markets, investors are attempting to get ahead of the next big move, an inclination for which we certainly have a fair amount of sympathy.
The balance of risks as we see them between now and the end of the year is that the longer end of the market continues to rally despite what we expect to be a decidedly hawkish tone from incoming Fed speakers as officials attempt to push back against the market's pricing in of a policy pivot.
Ben Jeffery:
Well, Ian, it's been a long short week and really it was always going to be a trading environment when the only thing that mattered was Thursday's inflation data. Sure, we got an impressive tail at the 10-year auction on Wednesday, but really the biggest takeaway was that October CPI print came in meaningfully below expectations with details that supported the peak inflation narrative, and that in turn brought 10-year yields decidedly back through 4% and even through 3.90 as buying interest in Treasuries picked up heading into the long weekend.
Ian Lyngen:
The moves were very sharp. We saw most sectors across the curve rallying by 25 basis points or more intraday, and that's meaningful given that this was the first significant miss that we've had on core CPI over the course of the last several months. Core CPI on an unrounded basis printed at 0.272% for the month of October. Consensus was for effectively double that at 0.5%. As a result, the year over year pace declined to 6.3 from 6.6. Now, that's the lowest since July and is very consistent with the notion that the prior Fed rate hikes have begun to have an impact on the real economy and realized consumer price inflation.
Owners equivalent rent also decelerated slightly, still above the norm, but printed at +0.6 versus +0.8 in September. Used car and truck prices declined 2.4%, and that's on top of the -1.1% in the prior month. Overall, the sentiment reflected in the Treasury market was one of renewed confidence that the Fed has made significant progress in its fight to keep forward inflation expectations well anchored.
Ben Jeffery:
Outside of the reaction in the longer end of the curve and 10-year yields, it was also extremely notable what we saw in the Fed Funds futures curve, specifically terminal pricing, and what was a very well entrenched expectation that terminal this cycle will be a 525 upper bound. That was before the CPI numbers hit. And after the data was in hand, we got a full 25 basis point rate hike pulled out of those valuations. Now the futures market shows an upper bound at 5%, but more immediately relevant is what this means for December's Fed meeting, specifically the debate between a 50 or 75 basis point rate hike.
And while yes, October's data is just a single month, the disappointment we saw Thursday morning all but takes another 75 basis point hike in December off the table. As we heard from The Wall Street Journal immediately following CPI, 50 basis points should be the operating assumption going into the last Fed meeting of this year.
Ian Lyngen:
Also keep in mind that we will get another CPI print before the Fed decision in December. It is certainly conceivable that if we see another lower than expected print in core terms, that the debate could shift to 50 versus 25. That certainly at this stage should be on the radar as a potential outcome.
Ben Jeffery:
And beyond December, the next phase of trading the Fed is likely going to be not how many additional 50 basis point moves we get, but how many quarter point hikes will be realized in the early part of 2023. At this point, a reasonable base case is at least one in February. If not necessarily, an additional quarter point move in March. But given we have four additional inflation prints between now and the March meeting, that is going to be, to quote Powell, data dependent. As for what this means for the level of rates in the front end of the curve, the argument can now be more compellingly made that the yield peaks and benchmark Treasuries are in.
We're transitioning to the point where investors are going to be less willing to sell rallies and more willing to buy dips. Now obviously a major theme of 2022 has been real money accounts decidedly underweight duration. And now that we've seen that bias move back toward neutral, the next step in that logical path is moving to overweight duration in an environment where the economy is beginning to slow and the lagged impact of the Fed's hikes are beginning to show up more materially.
Ian Lyngen:
Another important milestone that we've seen in the Treasury market in the wake of the October CPI data was the rally in 10-year yields brought the benchmark through the effective Fed Funds rate. Now, this is a dynamic that we had on our radar for this period between the November and December meetings. The fact that this occurred based solely on a single inflation print is somewhat surprising. However, with effective Fed Funds currently at 3.83, the fact that 10s got as low as 3.825 does set up for a meaningful challenge of the narrative that effective Fed Funds should function as a floor for Treasury yields up until the point the Fed is done hiking.
Now, clearly the next 50 basis point rate hike in December will push rates well through effective at least further out in the curve. What remains to be seen is whether the two-year sector will use effective Fed Funds as a floor. All else being equal, we do think that that will hold as a floor into the end of the year. It's not until the market can see the final hike, which will presumably be in March, if not May, that we would expect the two-year sector to begin to outperform versus funds.
Ben Jeffery:
While we've talked a lot about the ongoing flattening potential of 2s/10s, we've reached the point in the cycle when flattening in 5s/30s is becoming less clear cut. One way to think about this uncertainty is really the degree of clarity we're going to have on the path of interest rates over the next five years, which in the post-pandemic world gets back to the question whether the shock brought on by COVID really ushered in a more structural change to the economy. Is inflation durably higher?
Do policy rates need to be more sustainably elevated? Ian, as you touched on, now that we are approaching the end of the hiking cycle, what version of policy easing needs to be incorporated into rate assumptions on the other side of 2023 and into 2024 and beyond? What does that mean for the steepening potential of 5s/30s as the economic data begins to roll over more significantly?
Ian Lyngen:
Our take has always been that the dislocations created by the pandemic were going to take much longer to work through the system, but ultimately, the post pandemic world won't be all that much different from before 2020. The notion that a push for fringe shoring and onshoring the manufacturing sector was going to ultimately lead to a sustainably higher wage inflation environment as inflation expectations become embedded in the economy only resonated on a temporary basis.
One of the reasons for this has been the Fed's commitment to the 2% inflation target. As long as the Fed is committed to returning inflation to 2%, even if the strength of the jobs market might otherwise have led workers to anticipate further wage gains on a forward basis, the reality is that the Fed's willing to endure enough demand destruction to make 2% happen.
Ben Jeffery:
And despite our and the market's latest focus on the disappointing CPI print, let's not forget what we saw last week in the jobs numbers. Another unquestionably strong read on hiring in October. And despite headlines to the contrary, even the jobless claims figures continue to show that the labor market overall remains in a very strong place. The participation rate still has room to increase. And while this strength will likely not keep the Fed hiking through the entirety of next year, it will provide Powell the excuse to not deliver rate cuts as soon as would otherwise be expected.
Given that even in an environment when inflation starts to decelerate more materially, we're still going to be a great distance from that 2% inflation target and the labor market still has ample room to give before the job side of the dual mandate will start to become a more important input than inflation into the Fed's calculus.
Ian Lyngen:
Recall, Ben, that we did see an increase in the unemployment rate, however, a two-tenths of a percent gain to 3.7% from 3.5%. That occurred with a decline in the number of jobs reported by the household survey. We made the observation at that point, and I still think that it's relevant, and that is we only tend to see a divergence between the headline nonfarm payrolls from the establishment survey and the change in jobs reported on the household level when there's an inflection. In this case, we're anticipating that the inflection is going to be toward a weaker labor market in 2023.
Now, to a large extent, that is by design because the Fed is actively attempting to put the brakes on the real economy to regain some of its lost credibility as an inflation fighter, but this is the area that we've identified as having the highest potential to indicate the Fed has overshot on the tightening side. We have a lot of confidence in the Fed's ability to move the unemployment rate from 3.5% to 4.5%, but much less confidence in their ability to stop the unemployment rate from going to 5.5% or 6%.
Ben Jeffery:
Ian, to put that risk you emphasized in a different terminology, central banks have a poor track record of engineering soft landings. It's this narrative that's going to be the defining trend of 2023, a worsening labor market, a lower growth environment, moderating wages, all with the global backdrop of the issues facing Europe as a result of the war in Ukraine and inflation, simmering geopolitical tensions in East Asia, and all of that will reinforce this safe haven dip buying bias that we'll argue has started to materialize over the past few weeks.
Ian Lyngen:
Well, at least it's materializing somewhere. Sorry, crypto.
In the week ahead, financial markets will continue to digest the downshift in core inflation and the implications for monetary policy makers not only in the US, but also globally. The economic data highlight will be Wednesday's retail sales numbers. We're anticipating a 1.1% increase in sales during the month of October, but we'll also get housing starts and permits data, as well as existing home sales on Friday. All of this with the backdrop of a variety of Fed speakers, including Williams, Harker, Jefferson, and Kashkari.
As we've heard so far, the Fed will not be dissuaded from a 50 basis point hike in December simply based on one weaker than expected core number, particularly as the downshift is consistent with the Fed's objective and we continue to see relative strength in the employment market. Now, as we've lamented, once momentum begins to shift in the employment landscape, we're concerned that the move might run too far. We also get the PPI data for October. But given that it follows CPI, it will be far less impactful for policy expectations we suspect.
Similarly, Wednesday's release of import prices for October will be more of a background factor reinforcing some of the moderation that we saw on the consumer price side. From a supply perspective, $15 billion, 20 years on Wednesday should require something of a concession if not outright, then at least on the curve. We also have Wednesday's $15 billion 10-year TIPS auction. Underwriting inflation protected securities in the current environment hasn't been a particular issue given the emphasis on the outperformance of inflation. At some point, there might be a wane in demand. But with year over year headline inflation still running at 7.7%, we're doubtful that it will be this year.
As we enter the latter half of November, we're reminded of the liquidity strains that are already evident in the Treasury market and the potential for those to exaggerate as the year end turn comes to fruition. If we are going to see any pre year end shift in the SLR, it will need to be announced sooner rather than later so the market can incorporate any changes. We've reached the point in this week's episode where we'd like to offer our sincere thanks and condolences to anyone who has managed to make it this far. Note that we do see the University of Michigan's Consumer Sentiment Report on Friday despite the bond market's closure.
Equity traders will be in to respond to the release, implying better sentiment in bonds than in stocks by definition. Thanks for listening to Macro Horizons. Please visit us at bmocm.com/macrohorizons. As we aspire to keep our strategy effort as interactive as possible, we'd love to hear what you thought of today's episode. Please email me directly with any feedback at ian.lyngen@bmo.com. You can listen to this show and subscribe on Apple Podcasts or your favorite podcast provider. This show and resources are supported by our team here at BMO, including the FICC Macro Strategy Group and BMO's marketing team. This show has been produced and edited by Puddle Creative.
Voiceover:
The views expressed here are those of the participants and not those of BMO Capital Markets, its affiliates or subsidiaries. For full legal disclosure, visit bmocm.com/macrohorizons/legal.
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Une première dans l'Ouest canadien : Avenue Living tire parti du programme d'amélioration écoénergétique de BMO pour ajouter 179 nouveaux logements locatifs dans le centre-ville d'Edmonton
Le sommet inaugural de BMO sur l’obésité est axé sur les thérapies et la lutte contre une épidémie croissante
Le coût des plans d’action des entreprises en matière de climat
Risque climatique : changements réglementaires à surveiller en 2024
Comment la NASA et IBM utilisent les données géospatiales et l’intelligence artificielle pour analyser les risques climatiques
L’obligation de publier de l’information sur les facteurs ESG est le signe d’un marché arrivé à maturité
BMO organise un financement vert pour financer le nouveau Lawson Centre for Sustainability, la construction la plus importante de Trinity College depuis un siècle
BMO se classe parmi les sociétés les plus durables d'Amérique du Nord selon les indices de durabilité Dow Jones
Le Canada a l’occasion de devenir un chef de file mondial de l’élimination du dioxyde de carbone
Selon un sondage réalisé par l'Institut pour le climat de BMO auprès des chefs d'entreprise, près de la moitié des chefs d'entreprise des États-Unis et du Canada croient que les changements climatique
Un plus grand nombre d’entreprises ont des plans pour lutter contre les changements climatiques en raison de l’importance croissante qu’ils revêtent sur leurs activités : Résultats du sondage
L’électrification constitue une occasion unique dans le cadre de la transition énergétique
Questions et réponses : comment transformer les défis économiques en possibilités
Le soutien du secteur de l’énergie dans l’atteinte des objectifs de décarbonisation du Canada
Trois idées inspirées de la Semaine du climat pour passer à l’action à la COP28
Pourquoi les entreprises doivent accélérer leurs efforts pour lutter contre les changements climatiques
Du caractère essentiel du financement pour doper les technologies d’élimination du carbone
Transformer le système alimentaire mondial au bénéfice des investisseurs et de la planète
Banco do Brasil and BMO Financial Group to Introduce First-of-its-Kind Program to Provide Sustainability-Linked Trade Loans Supporting Brazilian Exporters
BMO Donates $3 Million to GRID Alternatives to Provide Solar Energy Solutions for Low-Income Families
Comment les investissements dans le captage du carbone peuvent générer des crédits carbone
BMO fournit un nouveau produit innovant, le dépôt lié à la durabilité, à Zurn Elkay Water Solutions
Quick Listen: Michael Torrance on Empowering Your Organization to Operationalize Sustainability
BMO seule grande banque nommée au palmarès des 50 meilleures entreprises citoyennes au Canada
Un investissement rentable : la rénovation comme moyen d’atteindre la carboneutralité
Évolution du marché du carbone : ce qu’en pensent les principaux acteurs
BMO et Bell Canada mettent en œuvre un produit dérivé innovant lié à la durabilité et à des objectifs ambitieux de réduction des émissions de gaz à effet de serre
Réduction du gaspillage alimentaire : solutions, occasions et retombées
J’attends avec impatience notre 18e Conférence annuelle sur les marchés agricoles
BMO fait partie d'un groupe convoqué par l'ONU qui conseille les banques mondiales sur l'établissement d'objectifs liés à la nature
Les chefs de file de l’investissement intensifient leurs efforts en vue d’atteindre l’objectif net zéro
Favoriser les innovations technologiques pour renforcer la résilience face aux changements climatiques
BMO célèbre le Jour de la Terre avec la 3e édition annuelle du programme Des transactions qui font pousser des arbres dans ses salles des marchés mondiaux
BMO Donates $2 Million to the University of Saskatchewan to Accelerate Research Critical to the Future of Food
L’infrastructure est la clé d’un marché compétitif en Amérique du Nord – Sommet États-Unis–Canada
Le temps presse pour les solutions au changement climatique - Sommet Canada-États-Unis
North America’s Critical Minerals Advantage: Deep Dive on Community Engagement
Réchauffement climatique : le GIEC lance son dernier avertissement de la décennie
Les légendes du roc réfléchissent aux réussites et aux échecs de l’industrie minière lors de la Conférence mondiale sur les mines, métaux et minéraux critiques
Exploration des avantages de l’extraction de minéraux critiques en Amérique du Nord dans le cadre de la Conférence mondiale sur les mines, métaux et minéraux critiques
La confiance est la denrée la plus précieuse : Message de l’ICMM à la Conférence mondiale sur les mines, métaux et minéraux critiques de BMO
Explorer les risques et les possibilités associés aux notations ESG dans le secteur minier
BMO Experts at our 32nd Global Metals, Mining & Critical Minerals Conference
Evolving Mining for a Sustainable Energy Transition: ICMM CEO Rohitesh Dhawan in Conversation
BMO Equity Research on BMO Radicle and the World of Carbon Credits
BMO tiendra sa 32e conférence mondiale sur le secteur des mines, des métaux et des minéraux essentiels
Public Policy and the Energy Transition: Howard Learner in Conversation
Taskforce on Nature-Related Financial Disclosure (TNFD) – A Plan for Integrating Nature into Business
Points à retenir du sondage sur le climat des petites et moyennes entreprises réalisé par l’Institut pour le climat de BMO
BMO nommée banque la plus durable d'Amérique du Nord par Corporate Knights pour la quatrième année d'affilée
Le financement vert du nucléaire : nouvelle frontière de la transition énergétique?
Assurer l’avenir des approvisionnements alimentaires : le rôle de l’Amérique du Nord
BMO s'est classé parmi les entreprises les plus durables en Amérique du Nord selon les indices de durabilité Dow Jones
Un sondage de l'Institut pour le climat de BMO révèle que les coûts et les priorités concurrentes ralentissent l'action climatique des petites et moyennes entreprises
Gérer et monétiser votre transition vers un monde carboneutre avec BMO et Radicle
BMO est l'institution financière la mieux classée selon le Global Sustainability Benchmark, le nouvel indice de référence mondial du développement durable annoncé lors de la COP 27
COP27 : Les problèmes de sécurité énergétique et l’incertitude économique ralentiront-t-ils la transition climatique?
BMO investira dans les crédits compensatoires de carbone novateurs de CarbonCure pour stocker du CO₂ de façon permanente
Financement commercial : vers le développement durable, une entreprise à la fois
RoadMap Project: An Indigenous-led Paradigm Shift for Economic Reconciliation
Une première canadienne : BMO et l'Université Concordia s'unissent pour un avenir durable grâce à un prêt innovant lié à la durabilité
Intégration des facteurs ESG dans les petites et moyennes entreprises : Conférence de Montréal
BMO entend racheter Radicle Group Inc., un chef de file des services environnementaux situé à Calgary
Investment Opportunities for a Net-Zero Economy: A Conversation at the Milken Institute Global Conference
S’ajuster face aux changements climatiques : l’Institut pour le climat de BMO
How Hope, Grit, and a Hospital Network Saved Maverix Private Capital Founder John Ruffolo
Hydrogen’s Role in the Energy Transition: Matt Fairley in Conversation
Key Takeaways on Ag, Food, Fertilizer & ESG from BMO’s Farm to Market Conference
Les risques physiques et liés à la transition auxquels font face l’alimentation et l’agriculture
Agriculture de pointe : réduire les impacts environnementaux en même temps que les coûts
Building an ESG Business Case in the Food Sector: The Food Institute
J’attends avec impatience notre 17e Conférence annuelle sur les marchés agricoles
Les prix des métaux encore loin d’une nouvelle normalité : Table ronde de BMO sur les mines
Aller de l’avant en matière de transition énergétique : Darryl White s’adresse aux gestionnaires de réserves et d’actifs mondiaux
BMO et EDC annoncent une collaboration pour présenter des solutions de financement durable aux entreprises canadiennes
Refonte au Canada pour un monde carboneutre : Conversation avec Corey Diamond d’Efficacité énergétique Canada
The Role of Hydrogen in the Energy Transition: FuelCell Energy CEO Jason Few in Conversation
BMO est fier de soutenir la première transaction d'obligations vertes du gouvernement du Canada en tant que cochef de file
Article d’opinion: Le Canada peut être un leader en matière de sécurité énergétique
Les mesures prises par le gouvernement peuvent contribuer à stimuler la construction domiciliaire afin de remédier à la pénurie de logements au Canada
Tackling Climate Change in Metals and Mining: ICMM CEO Rohitesh Dhawan in Conversation
La circulaire de sollicitation de procurations et les rapports sur la durabilité 2021 de BMO sont maintenant disponibles
Why Changing Behaviour is Key to a Low Carbon Future – Dan Barclay
BMO lance le programme Services aux entreprises à portée de main - BMO pour les entrepreneurs noirs et annonce un engagement de 100 millions de dollars en prêts pour aider les entrepreneurs noirs à dé
The Post 2020 Biodiversity Framework – A Discussion with Basile Van Havre
BMO annonce son intention de se joindre au programme Catalyst de Breakthrough Energy pour accélérer l'innovation climatique
BMO Groupe financier nommé banque la plus durable en Amérique du Nord pour la troisième année d'affilée
Using Geospatial Big Data for Climate, Finance and Sustainability
Atténuer les répercussions des changements climatiques sur les actifs physiques par la finance spatiale
BMO aide Boralex à aller Au-delà des énergies renouvelables en transformant sa facilité de crédit en un prêt lié au développement durable
Première mondiale : BMO soutient Bruce Power avec le premier cadre de financement vert du secteur nucléaire au monde
BMO se classe parmi les entreprises les plus durables au monde, selon les indices de durabilité Dow Jones
COP26 : Pourquoi les entreprises doivent assumer leur responsabilité sociale
The Future of Remote Work and Diversity in the Asset Management Industry
Changer les comportements est essentiel pour assurer un avenir à faible émission de carbone – Table ronde Milken
BMO aide Teck Resources à progresser vers ses objectifs ESG avec un prêt lié à la durabilité
Première dans le secteur des métaux et des mines en Amérique du Nord : BMO aide Sandstorm Gold Royalties à atteindre ses objectifs ESG grâce à un prêt lié à la durabilité
Éducation, emploi et autonomie économique : BMO publie Wîcihitowin ᐑᒋᐦᐃᑐᐏᐣ, son premier Rapport sur les partenariats et les progrès en matière autochtone annuel
BMO annonce un engagement de financement de 12 milliards de dollars pour le logement abordable au Canada
In support of Canada’s bid to host the headquarters of the International Sustainability Standards Board
Investing in Real Estate Sustainability with Bright Power Inc.
BMO appuie la candidature du Canada pour accueillir le siège du Conseil des normes internationales d'information sur la durabilité
BMO nommé au classement des 50 meilleures entreprises citoyennes au Canada de Corporate Knights
ESG From Farm to Fork: Doing Well by Doing Good
Banques centrales, changements climatiques et leadership : Forum annuel destiné aux femmes œuvrant dans le secteur des titres à revenu fixe, devises et produits de base
BMO met sur pied une nouvelle équipe innovatrice pour la transition énergétique
L’appétit croissant pour l’investissement dans un but précis dans les valeurs à revenu fixe par Magali Gable
BMO organise le congrès annuel mondial sur les marchés agricoles pour une 16e année consécutive
Première nord-américaine : BMO aide Gibson Energy à transformer entièrement une facilité de crédit en un prêt lié à la durabilité
Le programme Des transactions qui font pousser des arbres permettra d’en planter 100 000
Les arbres issus des métiers bénéficient d'un marché obligataire ESG solide
Understanding Biodiversity Management: Best Practices and Innovation
The Changing Face of Sustainability: tentree for a Greener Planet
La 30e conférence mondiale annuelle sur le secteur des mines et des métaux de BMO est en cours
Favoriser des résultats durables : le premier prêt vert offert au Canada
Episode 29: What 20 Years of ESG Engagement Can Teach Us About the Future
Rapport sur les perspectives de 2021 de BMO Gestion mondiale d'actifs : des jours meilleurs à venir
Episode 28: Bloomberg: Enhancing ESG Disclosure through Data-Driven Solutions
Comment Repérer L’écoblanchiment Et Trouver Un Partenaire Qui Vous Convient
BMO se classe parmi les entreprises les plus durables selon l'indice de durabilité Dow Jones - Amérique du Nord
Episode 27: Preventing The Antimicrobial Resistance Health Crisis
BMO investit dans un avenir durable grâce à un don d’un million de dollars à l’Institute for Sustainable Finance
BMO Groupe financier franchit une étape clé en faisant correspondre 100 pour cent de sa consommation d'électricité avec des énergies renouvelables
BMO Groupe financier reconnu comme l'une des sociétés les mieux gérées de manière durable au monde dans le nouveau classement du Wall Street Journal
Episode 23: TC Transcontinental – A Market Leader in Sustainable Packaging
Les possibilités de placement durables dans le monde d’après la pandémie
BMO Capital Markets to host 2020 Prescriptions for Success Healthcare Virtual Conference
Les sociétés axées sur l’efficacité énergétique peuvent maintenant réduire leurs coûts d’emprunt
BMO Groupe financier s'approvisionnera à 100 pour cent en électricité à partir d'énergies renouvelables
Episode 13: Faire face à la COVID-19 en optant pour des solutions financières durables
Épisode 09 : Le pouvoir de la collaboration en matière d'investissement ESG
Épisode 08 : La tarification des risques climatiques, avec Bob Litterman
Épisode 07 : Mobiliser les marchés des capitaux en faveur d’une finance durable
Épisode 06 : L’investissement responsable – Tendances et pratiques exemplaires canadiennes
Épisode 04 : Divulgation de renseignements relatifs à la durabilité : Utiliser le modèle de SASB
Épisode 03 : Taxonomie verte: le plan d'action pour un financement durable de l'UE
Épisode 02 : Analyser les risques climatiques pour les marchés financiers