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CPI of the U.S. climbs up 2.7% during the first 5 months of this year. At this rate, CPI measured inflation will rise 6.5% in 2021. However, whether this rate remains the same speed is questionable because the basis (i.e., from January to May of 2020) was low due to the pandemic lockdowns last year.
One interesting economic indicator is the daily balance of FED’s Overnight Reverse Repurchase Agreement (ON/RRP) Facility, which hits a record high this week. You can view the chart on the website of the Federal Reserve Bank of St. Louis (https://fred.stlouisfed.org/series/RRPONTSYD/ ).
Put in plain English, this number can be deemed as unused excessive money supply. The purpose of Fed’s money printing strategy is to pour money into the markets, but banks return a good amount of the money back to Fed through ON/RRP. The Fed likely will take some actions earlier than expected.
In terms of this week’s market condition, we used the high volatility settings to scan the conforming credit spreads. Premier Members can view the screening reports of conforming credit spreads, and others can join us to test-drive free for 30 days.