FOMC Week and Tracker Updates

Alright so Friday’s equity move was clearly a major reversal of the prior day. It seems like the market makers had a plan to stick it to all the call buyers that existed for Fridays OpEx. We know that the options related activity has a way of moving equity markets especially from the market makers perspective who have to buy and sell based upon taking one side or another. We also know seasonals do not look great for the latter half of September and with FOMC this week, seems like a ripe time to take off some risk. This is exactly what happened on Friday. So be ready for this week as the FOMC is on tap and everyone expects an unchanged policy, call it skip, call it pause, but we do not expect J Powell and Co. to tilt their inflation rhetoric.

We suspect he will talk about core CPI and its continued decline, but we do not expect them to change their narrative on data dependency and to keep the markets expecting the higher for longer mantra.

Alright just a couple of charts here, first off we continue to see the run down in Reverse Repo usage as its now down about $1.1T off its highs now down to $1.4T:

Source: Federal Reserve

We suspect the Money Market Mutual Funds to continue to use this but we suspect they are keeping some liquidity out of this program and perhaps waiting for some Corporate Debt that will be available in the coming months.

Another chart we liked was from MishTalk, his work is excellent and you should read it if you do not. Anyway this is a great chart that shows exactly how the U.S. debt pile will continue to exceed 100% of GDP:

This is a massive headwind and we suspect that eventually lower rates will ease some of this projection, but not by much, then again, maybe the U.S. won’t have much say in the price it pays for its debt…