The eight days
Between Friday and the following Thursday there are three prints that matter more than everything else on the calendar combined: CPI on Friday the 11th, the FOMC decision on Wednesday the 16th, and the Bank of Japan on the 17th and 18th.
Central bank meetings landing back to back is not unusual. What is unusual is that the market has already made up its mind about one of them and not the other. Traders have moved to fully pricing a 25 basis point BOJ hike to 1.25%. They have not made a comparable commitment about the Fed, and the President spent part of last week publicly demanding cuts after a payrolls report that argued against them.
That gap is the story. If CPI runs hot on Friday, the Fed's room narrows into a meeting where it is being leaned on politically, and it does so 24 hours before a central bank on the other side of the world does the opposite. The yen has already started trading it: USD/JPY broke through 154 on Monday, down more than 1% on the day, in holiday liquidity thin enough to exaggerate any move.
What we actually measured
Crude is tight, and the tightness is physical. US commercial crude stocks drew 4.5M barrels on the week, and the physical tightness is showing up in refined products before it shows up in the headline price.
Liquidity is genuinely neutral, which is worth saying out loud. Net liquidity $5.79T, down $26B over four weeks. Reverse repo has drained to $1B — effectively empty, which removes a shock absorber that was available for the last two years. High yield spreads at 2.65% and VIX at 14.3 say credit is not worried. Those two sit oddly together: no buffer left, and no concern priced.
Food supply is the one nobody is looking at. Corn is 26% good-to-excellent in week 35. Soybeans are 61%. That is not a small gap, it is a different crop year for one of them. US drought coverage sits at 68%, with 27% at severe or worse. Grain stress feeds the same CPI print that lands on Friday.
The week ahead
| WED 9/9 | EIA crude stocks |
| THU 9/10 | Jobless claims |
| FRI 9/11 | CPI |
| WED 9/16 | EIA crude stocks · FOMC decision |
| THU 9/17 | Jobless claims · Bank of Japan begins |