3 Numbers: EU Construction Setback, U.S. Chicago Fed, 10-Year Yield
James Picerno | Apr 20, 2015 02:02AM ET
Monday’s a slow day for scheduled economic releases, but macro risk will be front and centre as the market focuses on Greece as it struggles to satisfy its creditors ahead of Friday’s meeting of Eurozone finance ministers. Meantime, Eurostat releases new data today on Eurozone construction activity. We'll also see the monthly update of the US macro trend via the Chicago Fed National Activity Index. On an otherwise light day for economic updates, keep an eye on the 10-year Treasury yield for clues about what the crowd's expecting for the US economy.
deadlines that could turn out to be crucial events for the evaluating Grexit risk.
econometric estimate for CFNAI’s three-month average anticipates an incremental rise to negative 0.07 vs. negative 0.08 in February. In other words, US growth will remain mildly below the historical trend.
The prospect that growth will pick up in the months ahead is still a viable if somewhat challenged view. That is, unless today’s release suggests otherwise by way of a hefty drop in CFNAI’s three-month moving average.
U.S. 10-Year Treasury Yield.
The IMF’s noted the president of the Federal Reserve Bank of Atlanta last week.
Meanwhile, inflation ticked up in March despite slower growth. The consumer price index rose for the second month in a row last month after falling in each of the three months through January. The news helped to raise the Treasury market’s implied inflation forecast to 1.89%, based on the yield spread for the nominal 10-year Note less its inflation-indexed counterpart. That's the highest estimate for inflation since last November.
The market’s inflation outlook is inching higher while the benchmark 10-year’s nominal yield is slipping. The market, it’s fair to say, is struggling to figure out what comes next. Incoming economic data will ultimately provide the answer, but the schedule’s light for the next several days. In the meantime, keep a close eye on the 10-year yield. A sharp change, up or down, may signal that the crowd’s focusing on a definite change in the trend, for better or worse. In particular, a decisive break lower in the 10-year yield below Friday's 1.87% level would indicate the market's expecting more bad news for the next round of economic updates.
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Disclosure: Originally published at Saxo Bank TradingFloor.com
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