Stronger Start Despite Yen Intervention. Busy Week Ahead

Monday is one of the quietest days of the week although there will be a potentially important update at 3pm when Treasury releases borrowing estimates for the upcoming quarterly auction cycle.  This 3pm release has been a surprisingly capable market mover in the past few quarters. 

The only other development at the start of the week is already in the rearview, probably…  It involved suspected (citing “sources familiar with the matter”) intervention in currency markets by Japan’s Ministry of Finance.  The following chart suggests it is highly likely, but in this case, it didn’t have an impact on Treasuries.  Past episodes of similar intervention have scared US rates traders due to heavy selling of Treasuries.  That could still happen in the near future, but it didn’t happen this time.

Tuesday’s headliner is the Employment Cost Index–a report the Fed has increasingly mentioned recently.

Things get serious on Wednesday with the final Treasury auction size announcement in the morning as well as ADP jobs, ISM manufacturing, and JOLTS.  The afternoon hosts the Fed announcement which may see the start of reduced balance sheet shrinkage (i.e. QT tapering).  It will also give Powell another chance to comment on the fading rate cut prospects thanks to recent data. 

After a break in the action on Thursday, the week finishes strong with the big jobs report and ISM services.