Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures are higher.
The two-day Federal Open Market Committee meeting kicks off tomorrow, with investors increasingly expecting the Fed will deliver a smaller 25 basis point increase in the fed funds rate.
Futures have held up well considering recent strains in the international financial system.
CURRENCY FUTURES
Some flight to quality longs are being liquidated in the U.S. dollar.
The annual producer inflation in Germany slowed for the fifth consecutive month to a 17-month low of 15.8% in February 2023 from a downwardly revised 17.6% in the previous month, and compared with market predictions of 14.5%.
The euro area recorded a trade deficit of 30.6 billion euros in January of 2023, widening slightly from a 30.2 billion euro gap in the same period of the previous year. Imports grew by 9.7% to 253.5 billion euros in the period, while exports jumped by 11.0% to 222.9 billion euros .
The Bank of England is seen hiking interest rates by 25 basis points on March 23. Some analysts believe this could be the last increase from the BoE in this current policy tightening cycle.
INTEREST RATE MARKET FUTURES
Futures are mixed.
The yield on the 10-year Treasury note extended its decline to the lowest in over six months, due to additional concerns regarding the stability of the global financial sector.
The U.S. Federal Reserve on Sunday said it joined with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank in a coordinated effort to enhance the provision of liquidity through the standing U.S. dollar swap line arrangements.
Financial futures markets are suggesting the Federal Open Market Committee will hike its fed funds rate by 25 basis points at its policy meeting on March 22, and there is a smaller chance the central bank may make no change in interest rates.
Currently there is a 66% probability the FOMC will hike by 25 basis points and a 34% probability of no change in the fed funds rate.
The June 30-year Treasury bond futures advanced to a new high for the move in the overnight trade before a pull-back.
The technicals and fundamentals for the June 30-year Treasury bond futures have become more supportive in the past two weeks.
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