Treasury yields are lower this morning as investors digest yesterday’s relatively hawkish FOMC statement/projections and today’s more dovish ECB policy statement. A combination of bear flattening post-FOMC and bull-flattening post-ECB has pushed the 2-year/10-year Treasury spread down to 37 bps this morning, a new current-cycle low. Equities turned lower post-FOMC yesterday, but both European equities and U.S. futures are higher this morning following the ECB announcement. Yesterday’s FOMC statement included an upgraded assessment of the economic outlook, and the median forecast for 2018 rate hikes rose from three to four (long-run funds rate left unchanged). While market participants focus heavily on these rate projections (the dots), it’s important to note that yesterday’s “increase” was driven by just one participant changing his/her forecast to 4 hikes, which was enough to lift the median projection. The Fed forecasts for GDP and inflation were also increased, and the unemployment rate forecast for 2018-2020 was lowered by 10-20 bps. Fed Chair Powell’s press conference was generally upbeat regarding the economic outlook, and as the May minutes suggested, the IOER rate was raised only 20 bps, 5 bps below the top of the current target range.

The ECB pledged that “there will be no rate hike before September 2019,” and it announced that it will begin tapering its current QE program in September with the intention of ending new purchases by end of this year. This is considered a dovish move by the central bank, particularly relative to yesterday’s Fed announcement, and as such, the euro is down more than 1% versus the dollar this morning.

Jason Haley
Managing Director, Investment Management Group

Date TimeEventSurveyActualPriorRevised
06/12/2018NFIB Small Business Optimism105107.8104.8
06/12/2018CPI MoM0.20%0.20%0.20%
06/12/2018CPI Ex Food and Energy MoM0.20%0.20%0.10%
06/12/2018CPI YoY2.80%2.80%2.50%
06/12/2018CPI Ex Food and Energy YoY2.20%2.20%2.10%
06/12/2018CPI Index NSA251.611251.588250.546
06/12/2018CPI Core Index SA256.884256.889256.45
06/12/2018Real Avg Weekly Earnings YoY0.30%0.40%
06/12/2018Real Avg Hourly Earning YoY0.00%0.20%
06/12/2018Monthly Budget Statement-$144.0b-$146.8b-$88.4b
06/13/2018MBA Mortgage Applications-1.50%4.10%
06/13/2018PPI Final Demand MoM0.30%0.50%0.10%
06/13/2018PPI Ex Food and Energy MoM0.20%0.30%0.20%
06/13/2018PPI Ex Food, Energy, Trade MoM0.20%0.10%0.10%
06/13/2018PPI Final Demand YoY2.80%3.10%2.60%
06/13/2018PPI Ex Food and Energy YoY2.30%2.40%2.30%
06/13/2018PPI Ex Food, Energy, Trade YoY2.60%2.50%
06/13/2018FOMC Rate Decision (Upper Bound)2.00%2.00%1.75%
06/13/2018FOMC Rate Decision (Lower Bound)1.75%1.75%1.50%
06/14/2018Retail Sales Advance MoM0.40%0.80%0.30%0.40%
06/14/2018Retail Sales Ex Auto MoM0.50%0.90%0.30%0.40%
06/14/2018Retail Sales Ex Auto and Gas0.40%0.80%0.30%
06/14/2018Retail Sales Control Group0.40%0.50%0.40%0.60%
06/14/2018Import Price Index MoM0.50%0.60%0.30%0.60%
06/14/2018Import Price Index ex Petroleum MoM0.20%0.10%0.10%
06/14/2018Import Price Index YoY3.90%4.30%3.30%3.60%
06/14/2018Export Price Index MoM0.30%0.60%0.60%
06/14/2018Export Price Index YoY4.90%3.80%3.70%
06/14/2018Initial Jobless Claims223k218k222k
06/14/2018Continuing Claims1732k1697k1741k1746k
06/14/2018Bloomberg Consumer Comfort54.8
06/14/2018Business Inventories0.30%0.00%
06/15/2018Empire Manufacturing1920.1
06/15/2018Industrial Production MoM0.20%0.70%
06/15/2018Manufacturing (SIC) Production0.00%0.50%
06/15/2018Capacity Utilization78.10%78.00%
06/15/2018U. of Mich. Sentiment98.598
06/15/2018U. of Mich. Current Conditions111.8
06/15/2018U. of Mich. Expectations89.1
06/15/2018U. of Mich. 1 Yr Inflation2.80%
06/15/2018U. of Mich. 5-10 Yr Inflation2.50%
06/15/2018Total Net TIC Flows-$38.5b
06/15/2018Net Long-term TIC Flows$61.8b
06/18/2018NAHB Housing Market Index7070
06/19/2018Housing Starts1312k1287k
06/19/2018Housing Starts MoM1.90%-3.70%
06/19/2018Building Permits1335k1352k1364k
06/19/2018Building Permits MoM-2.10%-1.80%-0.90%
06/20/2018MBA Mortgage Applications-1.50%
06/20/2018Current Account Balance-$129.0b-$128.2b
06/20/2018Existing Home Sales5.56m5.46m
06/20/2018Existing Home Sales MoM1.80%-2.50%
06/21/2018Initial Jobless Claims218k
06/21/2018Philadelphia Fed Business Outlook25.534.4
06/21/2018Continuing Claims1697k
06/21/2018FHFA House Price Index MoM0.10%
06/21/2018Bloomberg Economic Expectations54.5
06/21/2018Bloomberg Consumer Comfort
06/21/2018Leading Index0.40%0.40%