together in the highest previous Fed press release

Tensions in the bond sector have not eased, but it is clear: it is better to prepare for the Fed’s “hawkish” speech, hoping for “balanced” remarks on inflation, than to bet – and you can argue – on the fact that Jerome Powell was the best friend of the markets for many years and will try to alleviate the stress of bondholders who have suffered an unprecedented collapse for 40 years.

Every word he said during his press conference will be thoroughly checked.
Although the increase in key rates by 50 basis points has already been largely taken into account, the main problem remains the rate of decline in its balance sheet: in the long run asset sales are $ 90-100 billion per month (ie about 1% of US $ 9.8 trillion). but it is provided.
The impact will be mitigated by a slight reduction in the first months, followed by a sharp increase in tax revenues due to very strong growth in 2021 (+ 7%), which will reduce US Treasury issues to finance the double deficit (fiscal and business).

Many operators hope that the head of the Fed will give a signal tonight that the central bank is ready to soften its actions to adapt to the recent slowdown.
At the same time, T-bonds tend to + 3Pts 2.983%, ’20 years’ jump 3.28% (30Pts more).

According to US statistics, investors noted the growth of activity in the US “services” sector, which in April was weaker than expected.
The Institute of Supply Management’s (ISM) monthly poll, released on Wednesday, fell to 57.1 last month from 58.3 in March, while economists expected a slight increase of about 58.5.

The component of new orders decreased the most – 54.6 compared to 60.1 in the previous month, followed by the employment sub-index, which fell to 49.5 after 54.
On the other hand, the activity and production component increased to 59.1 from 55.5 in March.
Another detailed figure is the ADP’s monthly survey on job creation in the non-agricultural private sector in the United States: it created only +247,000 jobs in April, far from the +4,000 consensus after 479,000 works in March (revised from initial estimate + 455 000).

In particular, 202 thousand jobs were created in the field of services (77 thousand of them in the field of recreation and hotels, as well as 48 thousand in the field of education and health care), and 46 thousand in the field of goods production.
The United States trade deficit rose + 22.3% to $ 109.8 billion in March from 89.8 billion in the previous month (revised from an initial estimate of $ 89.2 billion), according to the Department of Commerce.

This significant deterioration from month to month reflects a 10.3% increase in imports of goods and services to $ 351.5 billion, which could not be offset by a 5.6% increase in exports to $ 241.7 billion.

In Europe, treasury bills confirmed the record profitability observed the day before, OAT posted +3 points at 1.5020%, the same spread on the Bund at 0.985%, Italian BTP increased by +10 points at 2.9560% (they were equal to profitability US T-Bonds) and Spanish Bonos +6 points 2.067%.
Gilts showed the best results with only +2 points of 1.978%, which is 100 points less than T-Bonds.

Note this figure, published this morning in France: the consolidated S&P Global PMI index recovered from 56.3 in March to 57.6 in April, the highest increase in French private sector activity since early 2018.

This trend mainly reflected the dynamism of the services sector, where expansion accelerated for the third month in a row and manufacturing output grew moderately during the month.

“Once the catch-up effect of the pandemic recovery is over, a slowdown in growth seems likely,” warns S&P Global, adding that “inflationary pressures are also having a strong impact on the outlook.”

Note that the Fed is not the only one fighting inflation: India has just raised its key rate by +40 points to 4.4%, in particular to support the rupee, as it will reduce imported inflation.

In Australia, 10-year yields continued to rise: +6 points to 3.465% (the central bank raised the key rate from + 25% to 0.35% the day before) after peaking at 3.57% against 3. 25% Monday.

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