Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher after yesterday Federal Reserve Bank of Atlanta President Raphael Bostic said it was important to get inflation under control, but policy makers should not act with such vigor that they hurt the economy, especially in light of the weaker global outlook.
Mortgage applications dropped 5.0%, the sixth straight week of declines, as mortgage rates continue to trend higher.
The 9:00 central time March existing home sales report is expected to show 5.86 million.
The main event today will be the 1:00 release of the Fed’s “Beige Book” on the economy. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles evidence on economic conditions from each of the 12 Federal Reserve districts.
CURRENCY FUTURES
The U.S. dollar index advanced to near a two-year high yesterday but is lower today.
The euro zone’s trade balance swung to a deficit in February from a surplus a year ago as the cost of imported energy increased sharply.
The Japanese yen recovered somewhat today after yesterday it fell to its lowest level in nearly 20 years. Recent pressure on the yen is linked to the Bank of Japan’s firm commitment to maintain ultra-easy monetary policies, which contrast sharply with other major central banks that are hiking interest rates.
Interest rate differential expectations remain bearish for the Japanese yen and lower prices are likely.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures fell to new lows for the move in the overnight trade but are higher now.
The Treasury will auction 20-year bonds today.
Federal Reserve speakers today are Mary Daly of 9:30, Charles Evans at 10:30 and Raphael Bostic at 12:00.
Currently there is a 93.2% probability of a 50 basis point increase and a 6.8% probability of a 25 basis point hike in the fed funds rate at the Federal Open Market Committee’s ’s May 4 policy meeting.
Lower prices are likely across the board for the interest rate futures market as most major central banks are anticipated to tighten credit policies this year.
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