Macro Minutes

Hiking cycles are extending or re-starting later in 2023 than many expected for the BoC and Fed, with the terminal points heavily dependent on the evolution of data in the near term. The BoE is similarly very data dependent, while the ECB looks set to extend its cycle further. Developed market economies have generally "outperformed" in the first half of the year, with expected weakness failing to materialize in hard data (so far).Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyCathal Kennedy (Desk Strategy), Senior UK EconomistSimon Deeley (Desk Strategy), Canada Rates StrategistAdam Cole (Desk Strategy), Chief Currency StrategistAdam Jones (Trading), Head of US Credit Algo Trading* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Debt ceiling negotiations turned out to be a lot less dramatic than many had anticipated – still to come are congressional votes – but once the smoke clears we’re left facing down the back half of the year with many of the questions investors had in January not much closer to being answered – it looks like we have seen peak headline inflation but core is proving to be stickier than many had anticipated. That has led to a reassessment of the policy outlook for the back half of the year – we discuss updated views on the Fed, BoE, ECB, BoC and RBA. The other side of the story is a buoyant equity market, seemingly impervious to hikes getting priced out. That may be puzzling or frustrating for macro investors but we discuss how the under-owned right tail in equities may signal more pain to come.Participants:Peter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics Izaac Brook (Desk Strategy), US Rates Strategy Analyst Simon Deeley (Desk Strategy), Canada Rates Strategist Robert Thompson (Research), Macro Rates Strategist Elsa Lignos (Desk Strategy), Head of FX Strategy Amy Wu Silverman (Desk Strategy), Head of Equity Derivatives Strategy * Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Debt limit talks are ongoing in Washington, with financial markets already jittery on US banking concerns amid restrictive policy stances across many developed markets. Recent ECB speakers have generally noted they expect further hikes, while the BoE left the door open in its data dependent stance. BoC communication over the last month has emphasized that another hike is very possible and any talk of cuts is premature. How close "to the limit" will central banks take policy?Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyCathal Kennedy (Desk Strategy), Senior UK EconomistSimon Deeley (Desk Strategy), Canada Rates StrategistAdam Cole (Desk Strategy), Chief Currency StrategistMichael Tran (Research), Global Energy Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

We have a number of major central banks meeting these next two weeks, including the RBA last night, the FOMC, ECB, later this week, and the BOE next week. While each of these institutions may be facing slightly different circumstances, it’s likely that all are nearing a decision point within the next meeting or two, where they have to decide whether to keep pushing against high inflation or trust that they have already delivered enough tightening to sustainably redirect inflation back to target levels. That debate may be framed by the tension between backward and forward looking frameworks. Or more specifically do you rely on backward looking data, which generally shows that inflation is still uncomfortably elevated and labor markets remain tight, or trust more forward looking, model driven forecasts that would suggest pent-up lagged effects and tightening in credit conditions due to banking stress, are already enough to pull inflation back to target?Participants:Blake Gwinn (Desk Strategy), Head of US Rates StrategyGerard Cassidy (Research), Head of U.S. Bank Equity Strategy & Large Cap Bank AnalystJason Daw (Desk Strategy), Head of North America Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & Economics)Elsa Lignos (Desk Strategy), Head of FX StrategySu-Lin Ong (Research), Chief Australia Economist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Rate volatility continues to be elevated, with policy rate expectations swinging around as determining the terminal rate and what happens afterwards is proving complicated. The unwinding of banking sector concerns accelerated into a more meaningful sell-off and rate hikes continued from most major central banks.Participants:Simon Deeley (Desk Strategy), Canada Rates Strategist, Izaac Brook (Desk Strategy), US Rates Strategy Analyst, Cathal Kennedy (Desk Strategy) - Senior UK Economist, Alvin T. Tan (Desk Strategy) - Asia FX Strategist, Lori Calvasina (Research) - Head of US Equity Strategy* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

The last week felt much calmer than anything experienced since the SVB and CS induced turmoil over the prior weeks. Volatility is much reduced, credit spreads are tighter and primary markets are re-opening again. Can this last and what are the lingering implications for markets and the economy from the March volatility? Participants: Peter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsBlake Gwinn (Desk Strategy), Head of US Rates StrategySean Taor (Debt Capital Markets), Head of European DCM and SyndicateJason Daw (Desk Strategy), Head of North America Rates StrategyAdam Cole (Desk Strategy), Chief Currency Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

It might be an overly simplistic argument, but in hindsight it should not be surprising that aggressive Fed rate hikes broke something in financial markets. Policy actions to ring fence the problems have been fast and furious but can all the kings horses and all the king's men, put dislocated markets back together again?Participants: Jason Daw (Desk Strategy), Head of North America Rates StrategyNicola Dransfield (Desk Strategy), European financials credit strategistAdam Jones (Trading), Head of US Credit Algo TradingTom Porcelli (Research), Chief US EconomistBlake Gwinn (Desk Strategy), Head of US Rates StrategyPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsAdam Cole (Desk Strategy), Chief Currency Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

As hockey and basketball enter the last weeks of the regular season, central banks themselves are approaching the end of their hiking cycles. There is significant divergence among global central banks, ranging from a conditional pause from the BoC in January (which we expect to be reiterated this week) to ongoing tightening messages from the ECB and the Fed.Participants: Cathal Kennedy (Desk Strategy), Senior UK EconomistSu-Lin Ong (Research), Chief Australia EconomistSimon Deeley (Desk Strategy), Canada Rates StrategistElsa Lignos (Desk Strategy), Head of FX StrategyAdam Jones (Trading), Head of US Credit Algo Trading* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

Are markets being fooled by lags? Not unusual for this point in the cycle, some data is coming stronger and some weaker. Recently the market has taken its cue from strong labor market data which might be a mistake. It has only been 6-8 months since large-scale rate hikes started and with monetary policy lags being anywhere from 12-24 months, there is a possibility that the bond market is underestimating the timing and magnitude of the growth downturn. But the patterns are not uniform across countries and this episode examines some of the nuances.Participants: Jason Daw (Desk Strategy), Head of North America Rates StrategyRobert Hogue (Research), Assistant Chief EconomistBlake Gwinn (Desk Strategy), Head of US Rates StrategistPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsAdam Cole (Desk Strategy), Chief Currency Strategist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts

The US payroll report sent shock waves through the fixed income market. Market pricing shifted aggressively - terminal pricing is now the highest in the cycle and finally consistent with the FOMC dots. Contagion has also spread to other markets. What now? Can the Fed keep hiking, can the BoC stay on hold, how much further will the BoE, ECB, or RBA go? And what are the implications for equities and FX? This episode delves into these topics.Participants: Jason Daw (Desk Strategy), Head of North America Rates StrategyBlake Gwinn (Desk Strategy), Head of US Rates StrategistPeter Schaffrik (Desk Strategy), Head of UK/European Rates & EconomicsElsa Lignos (Desk Strategy), Head of FX StrategyLori Calvasina (Research), Head of U.S. Equity StrategySu-Lin Ong (Research), Chief Australia Economist* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts