Thursday, May 19, 2016

Eurodollar Futrure - Biggest Move Since 2011

The Fed usually does a better job at telegraphing its intent than it has done lately.  The April FOMC Minutes offered strong attention paid to the possibility of a June rate response, where little prospect of that happening had already been priced.  Interestingly, was the number of time the Minutes referenced the ‘June’ meeting rather than ‘an upcoming’ meeting or a ‘nearby’ meeting. 
The front Eurodollar (EDM6 – June 2016 Eurodollar) future contract fell by 4.5 bps yesterday from open to close and by 5 bps from the prior session close.  Yesterday marked the largest single session open to close decline since July 11, 2011. 
There is less than a month (27 days) before the June FOMC meeting conclusion and a study by Goldman Sachs showed that with great consistency, the market has priced a large majority of a forthcoming FOMC rate move 30 days or more before the meeting outcome.  Since yesterday’s open, economic agents have been hard at work bringing the front end of the yield curve more in line with a greater prospect for a June rate response.
Data dependence notwithstanding, the Fed is still learning how to be transparent in a policy regime that lacks ‘policy path’. 


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