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Message
Big FOMC Meeting Today
Posted on 12/17/14 at 10:43 am
Posted on 12/17/14 at 10:43 am
Markets have been priced ~60-70% for mid 2015 rate hikes, slightly extending out with the geopolitical events recently.
Big things to watch for:
1. Does the Fed remove "considerable period" from the statement? This is important since historically after the Fed has removed this phrase from their statement, they have hiked rates ~6 months afterwards.
2. If they don't remove the language, does Yellen give color in the press conference? Art Cashin even noted this morning that he thought they would give themselves more leeway by keeping the language but talking about it in the press conference, hence they don't give themselves or the market any additional set timelines.
3. How much do they reference the geopolitical issues and in what color do they reference the oil price decline? If the Fed statement (or Yellen's press conference) mention anything about Russia or oil as a headwind then you'll likely see rate hike pricing moving farther back in 2015.
Big things to watch for:
1. Does the Fed remove "considerable period" from the statement? This is important since historically after the Fed has removed this phrase from their statement, they have hiked rates ~6 months afterwards.
2. If they don't remove the language, does Yellen give color in the press conference? Art Cashin even noted this morning that he thought they would give themselves more leeway by keeping the language but talking about it in the press conference, hence they don't give themselves or the market any additional set timelines.
3. How much do they reference the geopolitical issues and in what color do they reference the oil price decline? If the Fed statement (or Yellen's press conference) mention anything about Russia or oil as a headwind then you'll likely see rate hike pricing moving farther back in 2015.
2
Posted on 12/17/14 at 10:47 am to BennyAndTheInkJets
A month ago, I would have said "considerable period" was dead and June/July 2015 would see a hike.
Now? With Oil dropping, Russia having problems, and even with this Cuba news, who knows? The entire short term calculus is now jumbled.
Fed in recent years seems to only want to move levers if they are sure what the end result will be. I think they just lost their assurance.
I think the still remove considerable period from the statement, but I think Yellen at the PC mentions the new issues.
Now? With Oil dropping, Russia having problems, and even with this Cuba news, who knows? The entire short term calculus is now jumbled.
Fed in recent years seems to only want to move levers if they are sure what the end result will be. I think they just lost their assurance.
I think the still remove considerable period from the statement, but I think Yellen at the PC mentions the new issues.
This post was edited on 12/17/14 at 11:03 am
Posted on 12/17/14 at 11:01 am to LSUFanHouston
The main thing I'm looking for is how they talk about the geopolitical issues. They've been very focused in their language to the US over the past 6 years, only twice have they mentioned other economies. Once about Europe for a while in 2011/2012 and they mentioned EM once last year during the taper tantrum.
They've been very focused on looking at the US in as much of a vacuum as possible since they have very little influence over other central banks. I don't think they mention Russia in the statement and at worst they mention oil in indifference, but more likely a tailwind for the economy.
The key here is if they don't mention Russia/Oil, yet don't remove "considerable period", how do they reference this in the press conference since economic data continues to come in strong.
They've been very focused on looking at the US in as much of a vacuum as possible since they have very little influence over other central banks. I don't think they mention Russia in the statement and at worst they mention oil in indifference, but more likely a tailwind for the economy.
The key here is if they don't mention Russia/Oil, yet don't remove "considerable period", how do they reference this in the press conference since economic data continues to come in strong.
Posted on 12/17/14 at 11:05 am to BennyAndTheInkJets
quote:
The key here is if they don't mention Russia/Oil, yet don't remove "considerable period", how do they reference this in the press conference since economic data continues to come in strong.
If they leave 'considerable period" in there, I could see them not mentioning any of this stuff in the PC. If anything, they might just say something about needing a longer track record. That buys them some time. By the next meeting, we may know more about these issues.
Posted on 12/17/14 at 11:20 am to LSUFanHouston
quote:
If they leave 'considerable period" in there, I could see them not mentioning any of this stuff in the PC
I really don't see them doing this (i.e. hope they don't) at all. This would just add a lot more volatility into the markets right now leading into year-end when liquidity absolutely fricking sucks. Geopolitical issues running hot + bad structural liquidity from regulation + even worse cyclical liquidity + heightened uncertainty via monetary policy = a scenario the Fed does not want.
This post was edited on 12/17/14 at 11:23 am
Posted on 12/17/14 at 1:11 pm to BennyAndTheInkJets
Damnit Replaced "considerable period" with the phrase that "it can be patient" regarding the rate hike.
No reference to Russia/Oil, just referenced the focus on inflation and upgraded the labor outlook. This may have just added more confusion to the markets. Is "patient" more or less dovish/hawkish than "considerable period"?
My take, same with what Yellen has said and Bernanke has said as post chairman many times, its just data dependent. If data keeps coming in strong then its June/July, if it weakens it'll be later.
Posted on 12/17/14 at 1:20 pm to BennyAndTheInkJets
quote:
BennyAndTheInkJets
What's your take on Yellen so far?
Posted on 12/17/14 at 2:18 pm to OnTheBrink
quote:I can't speak for Benny, but as for me, Yellen is one of the most dynamic, entertaining, exciting public speakers I've ever listened to....
What's your take on Yellen so far?
Posted on 12/17/14 at 2:35 pm to LSURussian
What does this mean here:
"Markets have been priced ~60-70% for mid 2015 rate hikes"
And how could one be sure?
"Markets have been priced ~60-70% for mid 2015 rate hikes"
And how could one be sure?
Posted on 12/17/14 at 4:51 pm to Iowa Golfer
She's made some gaffes in press conferences that she shouldn't have (no need for her to comment on the fair value of biotech stocks). But those aside she's done a fairly good job so far. I'm trying to be as absolutely neutral as possible here and not compare her to her predecessor which I hold in extremely high regard. I think the time to judge Yellen's actions as a leader and chair will be this upcoming year.
This is all from an "output" perspective. As Russian has noted, she is an absolutely wonderful public speaker who engages the audience in a way that is somewhat similar to William Wallace from Braveheart, Denzel from Remember the Titans, mixed with a little bit of the president's speech from Independence Day. In no way am I bored at all during her press conferences.
This is all from an "output" perspective. As Russian has noted, she is an absolutely wonderful public speaker who engages the audience in a way that is somewhat similar to William Wallace from Braveheart, Denzel from Remember the Titans, mixed with a little bit of the president's speech from Independence Day. In no way am I bored at all during her press conferences.
This post was edited on 12/17/14 at 4:56 pm
Posted on 12/17/14 at 4:54 pm to BennyAndTheInkJets
quote:Am I Houston??
As Houston has noted
Posted on 12/17/14 at 4:55 pm to Iowa Golfer
quote:
"Markets have been priced ~60-70% for mid 2015 rate hikes"
This comes from looking at the forward OIS curves and the Eurodollar curves. It would be a lot easier to me to explain if I could use photobucket at work (or a Bloomberg terminal at home). It's not an exact science, but as close as you can come. In a simplified sense, its where your forward rate, minus your term premium, indicates at least a 25bps increase in rates.
This post was edited on 12/17/14 at 4:57 pm
Posted on 12/17/14 at 4:56 pm to LSURussian
frick, edited. My bad.
Posted on 12/17/14 at 5:03 pm to BennyAndTheInkJets
quote:You did a better job of explaining it than I would. I was just going to say, "it involves math and shite."
This comes from looking at the forward OIS curves and the Eurodollar curves. It would be a lot easier to me to explain if I could use photobucket at work (or a Bloomberg terminal at home). It's not an exact science, but as close as you can come. In a simplified sense, its where your forward rate, minus your term premium, indicates at least a 25bps increase in rates.
Posted on 12/17/14 at 5:58 pm to LSURussian
quote:
"Markets have been priced ~60-70% for mid 2015 rate hikes"
This comes from looking at the forward OIS curves and the Eurodollar curves. It would be a lot easier to me to explain if I could use photobucket at work (or a Bloomberg terminal at home). It's not an exact science, but as close as you can come. In a simplified sense, its where your forward rate, minus your term premium, indicates at least a 25bps increase in rates.
There would always be a forward curve on OIS anyway?
"Markets have been priced ~60-70% for mid 2015 rate hikes"
This comes from looking at the forward OIS curves and the Eurodollar curves. It would be a lot easier to me to explain if I could use photobucket at work (or a Bloomberg terminal at home). It's not an exact science, but as close as you can come. In a simplified sense, its where your forward rate, minus your term premium, indicates at least a 25bps increase in rates.
There would always be a forward curve on OIS anyway?
Posted on 12/17/14 at 6:06 pm to Iowa Golfer
Not understanding what you're trying to say/ask?
This post was edited on 12/17/14 at 6:07 pm
Posted on 12/17/14 at 6:09 pm to BennyAndTheInkJets
It's a swap? Wouldn't it always have a froward curve?
Posted on 12/17/14 at 6:17 pm to Iowa Golfer
The tenors and forward rates are different.
For example, a 2Y1Y OIS swap would be 1Y OIS rates, 2Y forward. If you have BBG just type "FWCM" -> GO. Your tenors on this table will be your Y axis and forward rates will be your X axis.
For example, a 2Y1Y OIS swap would be 1Y OIS rates, 2Y forward. If you have BBG just type "FWCM" -> GO. Your tenors on this table will be your Y axis and forward rates will be your X axis.
Posted on 12/17/14 at 7:03 pm to BennyAndTheInkJets
quote:FWIW, I used to love the Three Tenors.....
The tenors and forward rates are different.
:rimshot:
Posted on 12/17/14 at 7:13 pm to BennyAndTheInkJets
So does this mean that the markets(US) are still going to be going up/down?
Or is there going to be a market 'correction' for 2015?
I won't mention any names but one guy(nationally syndicated radio) in the finance world is predicting a huge market 'correction' at least by mid 2015.
And no, this isn't that bald headed guy who is 'mad'.
Or is there going to be a market 'correction' for 2015?
I won't mention any names but one guy(nationally syndicated radio) in the finance world is predicting a huge market 'correction' at least by mid 2015.
And no, this isn't that bald headed guy who is 'mad'.
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