FOMC Meeting Minutes August 21, 2013

FOMC Minutes August 21, 2013

WHAT TO EXPECT:

Traders Cheat Sheet Call:

FOMC Minutes will disappoint the market's built up expectations resulting in volatility as Fixed Income recoils.

THE WHY:

The Market Profiled: There will be some Hawkish leads in the FOMC Minutes, that goes without saying, however, it will omit any straight reference to a September Taper. It will likely not mention quantity, quality (MBS v.s Treasury) or Month of Commencement. So despite the clear Hawkish overtone the FOMC Minutes will disappoint!

PROFILE:

Our call on the last FOMC Minutes was Short the Minutes Long Bernanke. Our Profile Analysis concluded that the only reason Bernanke gave a speech that coincided with the Minutes was to offset the Hawkish Tone that the FED feared. We checked back and could not find the last time a Chairman spoke immediately after the Minutes. There is no FED speakers on tap today.........you know why.......they know the FED Minutes will NOT be a SHORT for FIXED INCOME.

Its been STRANGELY Quiet from the FED.........The Last thing the FED wants is for Rates to Rise Prematurely. IF THE MINUTES WERE GOING TO CAUSE YIELDS TO RISE MORE DRAMATICALLY - WE WOULD HEAR THE FED YAMMERING IN ADVANCE DURING AND AFTER THE MINUTES THAT "TAPERING DOES NOT MEAN RATES WILL RISE ANYTIME SOON" - yah right, have they looked at recent yields...........? Regardless, since that has not happened and is not scheduled to happen based on FED Speaker Schedules - FIXED INCOME WILL CATCH A BID

ANALYSIS:

September Taper (SeptTaper) will happen but it won't start today. Fixed Income and every other Market has priced it in and the only room left is for a disappointment. That is not just to be contrarian but a market so convinced - will be right on the event BUT wrong on timing. THEREFORE, we expect that Fixed Income will pull back with equities less certain.

MARKETS:

Treasury 10yrs - will rise

Eurodollar Contracts will rise with less noise in the front of the curve. DEC13 through Mar15 may take the brunt of the move because the Minutes will still be Hawkish just disappointing

SPX - This is a much tougher call because again the Minutes will disappoint but still be Hawkish and in the end the Market knows the Grand Taper is coming