Markets will be focused on FOMC and inflation this week

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Published Date 6/12/2023

The 10 began down 2 bps from Friday, MBS prices -14 bps. This is a huge week. The FOMC and inflation data are the headlines, but the calendar is full, and Treasury will auction a total of $90B of note and bonds prior to the Wednesday FOMC statement. The ECB is also meeting this week and is expected to increase its rates. The Fed will pass on a rate increase, look at the estimates for May CPI and PPI in the calendar below; the consensus estimates are for inflation to have declined in May.

The Fed has a dilemma, fight inflation and at the same time avert a credit crunch. Inflation, if the consensus estimates turn out to be true will help a little but so far, all comments from Fed officials and Powell himself must decide between fighting inflation or letting easy money continue. Presently the consensus is the Fed, after this pause will again increase rates at the July FOMC meeting. The consumer is doing well despite higher rates, we will see retail sales on Thursday. Hedge funds continue to expect that inflation is going to continue.

At 9:30 am the DJIA opened +55, NADSAQ +59, S&P +11. 10 year unchanged at 3.74%. FNMA 6.0 30 year coupon at 9:30 am -3 bps and +13 bp from 9:30 am Friday.

At 11:30 am 3 year note auction.

At 1 pm $32b 10 year note auction.

This Week’s Economic Calendar:

• Monday,

11:30 am $40B 3 year note auction

1 pm $32B 10 year not auction

2 pm May Treasury budget (+$205.0B)

• Tuesday,

6 am May NFIB small business optimism index (88.4 from 89.0)

8:30 am May CPI (month/month 0.2% from +0.4%; year/year +4.1% from 4.9%; ex food and energy month/month +0.4% from +0.4%, year/year +5.3% from 5.5%)

1 pm $18B 30 year bond auction

• Wednesday,

7 am weekly MBA mortgage applications

8:30 am May PPI (month/month -0.1% from +0.2%, year/year +1.6% from 2.3%; ex food and energy month/month 0.2% from +0.2%, year/year +2.9% from 3.2%)

2 pm FOMC policy statement

2:30 pm Jerome Powell’s press conference

• Thursday,

8:30 am weekly jobless claims (250K down from 261K the previous week)

June Philadelphia Fed business index (-13.2 from -10.4)

May retail sales (0.0%, ex vehicles +0.1%)

May Empire State manufacturing index (-15.1 from -31.8)

May import and export prices (imports -0.6%, exports -0.5%)

9:15 am May industrial production and capacity utilization (production +0.1%, cap utilization 79.6% from 79.7%)

10 am April business inventories (+0.2%)

• Friday,

10 am U. of Michigan mid-month consumer sentiment index (60.5 from 59.2 in May)

Source: TBWS

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