Halister News

(Bloomberg) -- In today’s FOMC minutes, “the market is going to be looking for a sense of capitulation that would confirm the current pricing of no hike in March,” BMO strategist Aaron Kohli says in note.

• “This week’s key data raises the stakes for the Fed,” as “they need the data to continue to show strength, or it risks bringing into question that the December hike was an error”
• “Price action in the long end of the UST curve has turned bearish over the past four sessions,” while “momentum is trending out of overbought extremes and signaling a move to higher yields”
• Other observations from strategist morning notes:
• CRT (Ian Lyngen): “Overbought momentum in Treasuries has begun to work itself off as yields retraced off the lows and we’re left with the obvious concern that the correction has run its course”; however, “we’re retaining our bearish bias for the time being, with an acknowledgment that higher yields are becoming more difficult to achieve and warrant further impetus –- most likely in terms of the data or price action in other assets”
  • “As we contemplate the day ahead we’re reminded that the return in corporate deal pricings had an impact on the Treasury market yesterday,” and “while we’re not expecting a repeat in the size of deals today, we understand from those who more closely follow the market that the deal calendar is building”
  • FOMC meeting minutes release “holds the potential to deliver some tradeable headlines in light of the policy- driven nature of the recent leg higher in this most recent rally”
• FTN (Jim Vogel): “Tuesday produced a mild bear steepener on the Treasury curve, and 10-yr UST can trade above 1.82% today before the FOMC minutes”; next battleground “will be around 1.85% (or below 1.74%),” and “one reason for the steeper curve is the $18b in 10-yr equivalent duration sold by high grade U.S. corporate issuers”
  • “One economic consequence of market disruption is that huge players like Apple see it in its better interest to issue $12b in debt to fund capital returns to shareholders in a down stock market (in effect buying its own stock at a depressed price) than to invest in near-term growth,” and “such developments are nothing new, of course, but they do help perpetuate the pricing power of dominant multi-nationals (read: low inflation)”
  • “Watch for a small overreaction to this afternoon’s FOMC minutes,” as “the Fed was likely still in stark denial about global financial conditions at the end of January”