Morning Notes — September

Light attendance and a relatively light catalyst calendar over the past two weeks have mostly led to trend continuation, but the sleepy dynamic ends with Friday’s release of August payrolls.  Attendance and volume returns on Tuesday to face a busy month of catalysts. Next Thursday’s ECB meeting may turn out to be a bigger event that expected.  Today’s hotter-than-expected August CPI report and this morning’s announced 70% vaccination rate could increase the likelihood of more-specific taper guidance. The ECB is only a few months behind the Fed, which is expected to begin tapering asset purchases in December.  Rising expectations for the ECB to join the Fed sometime in Q1’22 could make bond supply/demand dynamics a more meaningful part of the narrative. The 9/22 FOMC meeting is widely expected to include a taper announcement with consensus looking for a $15B monthly pace.  However, the September Fed meeting will also include an updated dot plot.  The last median dot showed member expectations for 2 rate hikes by year-end 2023, but it could easily move to 3 hikes with the first hike slipping into 2022. The month of September is also very busy with sell-side conferences, which will be the first opportunity for most management teams to provide guidance/qualitative commentary on CQ3 trends.