Citi Warns "Something Seems To Be Going On Here" As Rate Hike Fears Storm Back
By Tyler Durden
It all started with a speech by the Atlanta Fed’s Dennis Lockhart and San Francisco Fed’s John Williams yesterday who said that two rate hikes may be warranted this year. Both Fed presidents suggested that they continue to see two to three rate hikes this year. Lockhart also added that markets are currently more pessimistic than he is, while Williams made mention of June being a live meeting and even went as far as to say that his view of gradual hikes also means 3-4 hikes in 2017.
That promptly led a notable repricing in the implied probability of a June and July rate hike, as well as a steep drop in both stocks and equities, bust most importantly Eurodollar futures which were quick spooked by the sudden shift in Fed rhetoric.
And with the (already quite stale) Fed minutes due later today, as well as all important speeches by Yellen’s right hand men, Fischer and Dudlely tomorrow, the market is clearly on edge. But is there really a risk of Yellen slamming the breaks on the Fed’s relent so soon after the Fed’s April announcement which once again reiterated “global” issues as a stumbling block for further tightening?
Here is the take of CitiFX’ Brent Donnelly who, while skeptical of a surprising U-turn by the Fed admits he has “squared up” all his trades, and is waiting for guidance from both the minutes, but especiall Fischer.
Fool me n times
There is decent downside momentum in the US front end, equities and EM as various advisers, CNBC and the market in general pile on the belief that the Fed has begun a coordinated effort to get June or July priced in so they can hike. There is particular focus on the following events:
Today 14:00 FOMC Minutes
5/19 09:15 Fischer delivers remarks at an event in NYC
5/19 10:30 Dudley remarks on macroeconomic trends at press briefing
6/3 03:45 Evans speaks on Economy and Policy in London
6/6 12:30 Yellen to address World Affairs Council at a luncheon
As ridiculous as I feel getting dragged into yet another round of Fed hype …read more
Source: Citi Warns "Something Seems To Be Going On Here" As Rate Hike Fears Storm Back
