The Market Today

NY Fed Discussing Changing Maturities of Asset Purchases

by Craig Dismuke, Dudley Carter

CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)



Global shares have traded unevenly on Friday following a fresh record for the S&P 500 on Thursday. The major indices in Asia closed mostly lower before Europe’s Stoxx 600 edged up by less than 0.2% to a new record high. Yesterday, the S&P 500 gained 0.4% and closed at an all-time high for a second consecutive session and the third time this week. The Dow added 0.2% while the Nasdaq led the others with a rally of more than 1%. Tech shares benefited from a steady decline in Treasury yields throughout Thursday’s session. The 10-year yield fell 5.4 bps to 1.62%, its lowest level since March 24, following the softer-than-expected jobless claims data and continued commentary from multiple Fed officials noting that it will take some time for the economy to move back to full employment (more below). Overnight, however, the 10-year yield has recouped all of that decline, rising 5.8 bps to 1.68% at 7:40 a.m. CT. The move up occurred over several hours, not sharply on a specific event, and comes amid a global rise in sovereign yields. Nonetheless, the reversal has tempered stocks’ rise, dragging Nasdaq futures down 0.2% and keeping S&P 500 futures little changed.


Fed’s Logan Hints At Increasing Purchases of 20-Year Bonds: Discussing the resumption of 20-year bond issuance last year, New York Fed Bank EVP Lorie Logan hinted yesterday that the Fed may shift its purchase allocations to better match issuance volume.  She said, “we plan to make minor technical adjustments to our purchase sectors and increase the frequency at which we update purchase allocations to remain roughly proportional to the outstanding supply of nominal coupon securities and TIPS.” The comments appear to be the groundwork for increasing purchases of 20-year Treasurys and decreasing purchases of TIPs (see Chart of the Day).

Kashkari and Daly Reaffirm Non-Preemptive Approach: Reiterating the Fed’s non-preemptive approach to tightening monetary policy, San Francisco Fed Bank President Mary Daly said yesterday, “We said substantial further progress, we have to see it, we don’t have to expect it, we have to see it.” Recollecting the tightening process coming out of the financial crisis, Minneapolis Bank President Kashkari said, “It was the workers of America that paid the price for those preemptive hikes that we undertook.”  Meanwhile, Fed Chair Powell said to an IMF meeting that the U.S. recovery is “uneven and incomplete.”

Bullard Believes Taper-Talk Could Begin Within a Year: St. Louis Fed Bank President Bullard said yesterday that it was too soon to discuss tapering.  He said, “I think we have to get the pandemic behind us first. … For me I’d like to see … a clearer end to the pandemic in the U.S.. … I don’t think we are really there yet.”  He went on to say, “I think it can happen within the next year.”


Producer Prices: The March producer prices report has been delayed as of 7:50 a.m. CT.  It was expected to be released at 7:30.  In the absence of the actual data release, there is speculation that prices rose more than expected for the month.  However, it is the detail that will matter insomuch as its implications for consumer prices.

Bloomberg Survey: The April Bloomberg Survey of Economists is scheduled for release at 8:00 a.m. CT and is likely to show an increase in growth projections.

Biden Budget: President Biden is expected to release the details of his first budget today which was front-run by news yesterday that he would request a small decrease in the Pentagon’s budget, which makes up the largest share of the overall defense budget.  Sources yesterday reported that he would call for a $715 billion budget for the Pentagon.

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