Quotes from Standard Chartered Bank
- We believe Friday's labour-market report could be crucial in conditioning expectations for the 18 March FOMC meeting.
- At her recent congressional testimony, Fed Chair Yellen effectively declared that forward guidanceas well as the policy rate outlook is entirely data-dependent. Since then, however, the data flow has been rather mixed, leaving the market uncertain about whether or not the Fed's "patient" language will be dropped from its next statement.
- In our view, it would take a clear upside surprise - 0.4% m/m or higher - on average hourly earnings for the market to price in the removal of "patient" more aggressively.
- By itself, another robust payroll print is unlikely to be enough to trigger such a view, even if the unemployment rate ticks lower. We expect earnings growth to moderate after the pop higher in January, which should at least help UST yields to stabilise head of the next FOMC meeting.
We stay Neutral UST duration heading into the payroll report. Ultimately, we expect the Fed to adjust its "patient" language on 18 March and we therefore reiterate our 2.30% end-Q1 forecast for the 10Y yield
