Recap :

Commentary:

Another sign that HY credit spread tightening is almost finished: the returns are more impacted by duration. As this chart from Business Insider below shows, the correlation between treasuries and HY have swung back into positive territory for the first time since 2007:

Notable:

  • Fed Minutes Highlights
  1. participants expressed a range of views regarding the amount of slack and how well the unemployment rate performs as a summary indicator of labor market conditions… Participants also noted the debate in the research literature and elsewhere concerning whether long-term unemployment differs materially from short-term unemployment in its implications for wage and price pressures
  2. several participants mentioned trends that, if continued, could become a concern from the perspective of financial stability. A couple of participants pointed to the decline in credit spreads to relatively low levels by historical standards;
  3. Participants observed that a number of factors were likely to have contributed to a persistent decline in the level of interest rates consistent with attaining and maintaining the Committee’s objectives. In particular, participants cited higher precautionary savings by U.S. households following the financial crisis, higher global levels of savings, demographic changes, slower growth in potential output, and continued restraint on the availability of credit.
  4. A number of participants noted the overall upward shift since December in participants’ projections of the federal funds rate included in the March SEP, with some expressing concern that this component of the SEP could be misconstrued as indicating a move by the Committee to a less accommodative reaction function. However, several participants noted that the increase in the median projection overstated the shift in the projections. In addition, a number of participants observed that an upward shift was arguably warranted by the improvement in participants’ outlooks for the labor market since December and therefore need not be viewed as signifying a less accommodative reaction function.
  5. Most participants favored providing an explicit indication in the statement that the new forward guidance, taken as a whole, did not imply a change in the Committee’s policy intentions, on the grounds that such an indication could help forestall misinterpretation of the new forward guidance.
  6. It was also noted that the postmeeting statements, rather than the SEP, provide the public with information on the Committee’s monetary policy decisions and that it was therefore appropriate for the postmeeting statement to convey the Committee’s position on the likely future behavior of the federal funds rate.
  7. Largely because of the combination of recent downward surprises in the unemployment rate and weaker-than-expected real GDP growth, the staff lowered slightly the assumed pace of potential output growth in recent years and over the projection period. As a result, the staff’s medium-term forecast for real GDP growth also was revised down slightly

German trade Balance improved to 16.3bn in Feb vs 17.5bn exp and 15bn prev.

USDA Report – April End Stocks:

  1. Corn: 1331M vs 1404M exp and 1456M prev
  2. Soybeans: 135M vs 138.5M exp and 145M prev
  3. Wheat: 583M vs 578M exp and 558M prev

WSJ: Investors are bracing for a raft of weak earnings reports, another factor that is adding to nervousness in the stock market.

Goldman is considering shutting down its Sigma X dark pool according to the Journal. Executives are weighing the revenue generated by the business against the risks associated with maintaining the platform.

Japan’s PM Abe said he will mobilize all possible measures to accelerate reforms and said Japan’s effective corporate tax rate around 35.6% is considered high compared with the global standard.

Upcoming Data:

  • Wed: Australia Employment
  • Thu: BoE, US Jobless Claims
  • Fri: TurkeyCurrent Account, US PPI,
  • Mon: US Retail sales, RBA Minutes
  • Tue: UK CPI, GermanyZEW, US Empire Mfg, CPI, NAHB Survey, NZ CPI, China GDP
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