US: Fed speakers today are all voters - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that it will be an interesting day in terms of Fed speakers with Cleveland Fed President Mester, Boston Fed President Rosengren, and Kansas City Fed President George all speaking.

Key Quotes

“All three are voting Fed Presidents this year and hence their words have added weight. We no longer expect a rate increase at the June meeting and while two of today’s speakers (George and Mester) are hawks, we doubt their comments will result in any major shift in rate expectations.

To some degree the hands of the Fed are constrained by falling yields globally. A 10-year UST bond auction yesterday drew record demand from indirect bidders and in a world of negative yields, that increased demand is understandable. The US-EU 10-year spread remains historically attractive at over 160bps and that is likely to continue drawing demand from abroad. That won’t necessarily lift the dollar.

We expect US presidential uncertainty to gain greater focus in the markets going forward. While there is a majority expecting a Clinton victory over Trump, increased uncertainty is bound to play a role in hedging decisions as we advance toward 8th November.”