Canaccord Genuity Morning Coffee FOMC Preview: A Jim Furyk-like Snap-hook Coming Wednesday?

June 19, 2012 10:30 AM EDT
Canaccord Genuity Morning Coffee on FOMC Preview: A Jim Furyk-like snap-hook coming this Wednesday?

Most market watchers believe the Federal Open Market Committee (FOMC) will act this Wednesday (June 20). Credit Suisse believes the "risk management" framework first espoused by Greenspan, endorsed by Bernanke, and recently cited by Fed Vice Chair Janet Yellen calls for further easing at this stage. U.S. growth momentum has clearly decelerated. Credit Suisse says the sanguine view that seasonal and weather factors created the illusion of economic volatility no longer seems plausible. The May retail sales data, in particular, provide clear evidence of a meaningful slowdown in final demand. The global picture is worse. Emerging markets are re-coupling to their sluggish OECD counterparts. Financial strains are obvious. To avoid adding to year-end concerns related to fiscal program expiries, Credit Suisse thinks that the Fed should extend "Operation Twist" to January 31, 2013. Look for a $350 billion program that would maintain purchases at roughly $50 billion per month, expect the bulk of these purchases to be in MBS ($225 billion). Has the market fully priced in Operation Twist - Part Deux? If it has and Part Deux doesn't materialize is it "fore left" for the markets?

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