Overview
This is a huge week with a ton of big-name economic data (GDP and PCE to name two), Fed action, speeches and more.
Three Things
The three areas that have the greatest ability to impact backend pricing this week are: (1) Central Bank Palooza, (2) Domestic Flavor and (3) Stimulation Nation.
(1) Central Bank Palooza: Last week, we heard from most of the world’s largest central banks. This week, we hear from the largest – as our own Federal Reserve will give us their latest Interest Rate Decision and Policy Statement on Wednesday at 2:00 pm ET followed by a live presser with Fed Chair Powell. There will also be key speeches from the heads of the ECB, Bank of England, Bank of Japan and more.
(2) Domestic Flavor: This is a very big week for economic data with several reports that have the gravitas to move the needle on pricing. PCE (the Fed’s main inflation rate) will get the most attention from traders but Durable Goods, GDP (4th quarter prelim), Chicago PMI, Consumer Confidence and Jobless Claims will be very important to watch as well.
(3) Stimulation Nation: It’s difficult to see any major movement on this during the week. House Speaker Pelosi is trying to switch gears and get a package through the reconciliation process which would take about two weeks for her to get the almost $2T package “right sized” so that it has a chance of moving through the Senate by simple majority. As it stands now any stimulus proposal has very low odds of moving through the Senate any time soon.
Treasury Dump
Here is this week’s auction schedule.
01/25: 2-year note
01/26: 5-year note
01/27: 7-year note
Market Wrap-up
Domestic Flavor
Treasury Dump: Today kicked off three days of dumping debt into the marketplace with today’s shorter term 2-year note. It was a very strong auction and well received. $60B went off at a high yield of 0.125%. The bid-to-cover ratio was 2.67.
On Deck for Tomorrow: Case Shiller Home Price Index, FHFA House Price Index, Consumer Confidence, Richmond Fed Manufacturing Index, 5-year Treasury note auction, FOMC begins two days of meetings.