• Turns out this year’s Jackson Hole was a non-event as Chair Powell, despite a the recent barrage of hawkish Fed-speak, remained stubbornly dovish. The takeaway form Friday’s speech: the actual tapering of bond buying will only start later this year. Read: announce in November, commence in December, but only if the current or any new waves of the pandemic throw the economy off course again.
  • The coup de grace for a possible September taper announcement was delivered by the hawkish (leaning) FOMC member Loretta Mester later on Friday. Not long after Powell spoke she suggested that the September meeting should be used for laying out the tapering plans. Think of a six month taper that will run for six months. That, in turn, would set the stage for a late 2022 hike. Note the contrast with the Bullard’s of the world, who were rooting for actually announcing the taper next month.
  • Markets got the message, with moderate declines in bond yields and lower odds of a rate earlier than the fourth quarter of 2022. However, with the 10y Treasury at 1.30 and the 30y Treasury at 1.91 we’re still stuck with range-bound trading. OIS forwards for the late summer/early autumn of 2022, which have been very sensitive to hawkish Fed-speak, are now trading at around 21bps, down from 25-26bps before Jackson Hole.


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