Halister News

(Bloomberg) -- Because yield curve is unlikely to “fully flatten” as in previous Fed hiking cycles, Nomura recommends paying 5y5y (anticipating return of MBS convexity hedging along with term premia) and receiving 3y1y to capture Fed’s long-run dot, Nomura strategists George Goncalves and Sam Wen say in July 26 note.

• “This cycle is an anomaly” because Fed balance-sheet unwind “will see a return of term premia/higher long-end rates”
• CFTC Commitments of Traders data show “large deviations” in speculative positions in TU and TY, “a rare occurrence”
• Speculators are extremely long the 10Y sector and extremely short the 2Y sector, a position stance that occurred twice before in the last 20 years, coinciding with the end of Fed hiking cycles
• Different this time “is that the curve is not at the flattest level that it could reach if we are tracking normal Fed hiking cycles”

To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Elizabeth Stanton

(Bloomberg) -- The Fed’s omission of “somewhat” in part of its inflation assessment simply acknowledges that inflation has come down, Charles Schwab analyst Kathy Jones said in a Bloomberg TV interview.

• Fed will still hike rates at modest pace, shows “clear eagerness” to start balance sheet runoff; markets had expected more hawkishness in statement
• Concerned about market’s “complacency”; VIX index “really low,” MOVE index at lowest level since tracking started in 1998, credit spreads “really tight”
• If dollar starts to rebound as Fed tightens and trims balance sheet, there could be “some vulnerability” in EM credit’s “really tight spreads”
• Next Fed chair may be neither Yellen nor Cohn; “I think they may go for a more conventional pick”

To contact the reporter on this story: Anna Windemuth in New York at awindemuth1@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang

(Bloomberg) -- Following are forecasts for today’s economic releases as compiled by Bloomberg News.

• Adv Goods Trade Balance $-65.5b; range $-71.5b to $-63.4b (31 estimates)
• Durables 3.9% m/m; range -1.1% to 7.5% (70 estimates)
• Durables Ex-Trans 0.4% m/m; range 0% to 0.9% (53 estimates)
• Cap Gds Nondef Ex Air 0.3% m/m; range 0% to 1% (21 estimates)
• Cap Gds Ship Nondef Ex Air 0.3% m/m; range 0.2% to 0.3% (4 estimates)
• Commercial aircraft will probably lead durable goods orders higher; core capital goods orders, a proxy for business investment, will probably hold steady: NatWest Markets
• In May, total orders dropped 0.8 percent, the second consecutive monthly decline
• Chi Fed NAI 0.37; range 0.1 to 0.5 (4 estimates)
• Initial Claims 240k; range 230k to 250k (39 estimates)
• Cont. Claims 1960k; range 1950k to 1980k (6 estimates)
• "Claims may experience some volatility as anecdotes suggest a larger and prolonged layoff period associated with the annual retooling in the auto industry”: Bloomberg Intelligence
• In the prior report, claims dropped to a nine-week low of 233,000
• Wholesale Inv. 0.3% m/m; range 0.2% to 0.5% (8 estimates)

To contact the reporters on this story: Chris Middleton in Washington at cmiddleton2@bloomberg.net; Vincent Del Giudice in Denver at vdelgiudice@bloomberg.net To contact the editors responsible for this story: Alex Tanzi at atanzi@bloomberg.net Kristy Scheuble