We are constantly asked how we find something every day for this report; well today it is a mishmash of items as we endeavour to avoid Brexit and the US China trade deal, which really seems the only news of note.
We start with an update, after two days of the Saudi Aramco deal being frantically bought and sold across the screens, volume was huge, it has settled down this morning with the ten year issue down about 20 cents from the reoffer price. In fact four of the five tranches are down in price with the longest maturity the 30 year issue the exception, which has seen life assurance buying pushing the price up about 15 cents.
We had the ECB yesterday, with no changes to policy and little to note other than President Draghi repeating that they would look into ways to migrate the impact of their policy stance on bank profitability, but he was not very specific on any measures that may be considered.
Likewise the Federal Reserve FOMC minutes from their March meeting had little new news on their patient stance, balance sheet maintenance or indeed their forecasts. There was a discussion regarding inflation, specifically about why inflation expectations had remained subdued despite the low level of the employment rate. Some members thought this reflected more slack in the labour market than implied by the unemployment rate but several others thought ‘Low inflation expectations were exerting downward pressure on inflation relative to the committee’s 2% inflation target’. This is worth noting as the Fed’s monetary policy review is scheduled for the first week of June and reflects that some participants have shifted away from looking for further rate hikes based on the tight labour market indicators. Quite timely as core CPI released yesterday dropped to a 13th month low of 2%.
Finally, last week we wrote about President Trump and his nominees for the vacant governor spots on the FOMC who were both outspoken in wanting immediate rate cuts. Yesterday Senator Romney said he didn’t think nominee Cain would get confirmed by the Senate and that Trump would be wise to nominate someone less partisan. Note; this is one of the very few times you can use wise and Trump in the same sentence.