April 6, 2021
Catalysts ahead: Tomorrow’s release of FOMC minutes from the March 17 meeting will be closely examined for any hints on the timing of Fed tapering. The Fed’s messaging around QE clearly needs to evolve in the weeks ahead with market expectations for tapering to begin in Q4. Tomorrow’s release of final March services PMIs carries the requisite density to change the near-term narrative on bond yields. And so does Friday’s release of China CPI/PPI for March. Reports suggest the PBOC has been asking its banks to curtail lending (hold unchanged year-over-year) on concerns around economic overheating. Reports also suggest that policymakers in China are concerned about the potential for import inflation given higher energy prices.
More: Ultimately, we expect 10-year yields will release higher to the 1.90%-1.94% range during Q2. Yesterday, the IMF raised its 2021 forecast 50bps to +6%, but that’s still too low based on indicative levels in March manufacturing PMIs. Better to pencil-in a +7% global growth number and be ready to revise it higher in the weeks ahead.