From the FXWW Chatroom: · 85% of respondents read Yellen as leaning to one 2016 hike;
· Hiking risk overwhelmingly in December even if September hiking risk modestly underpriced
· About 2/3rds expect an indication of a December hike in the speech, with many more seeing it in abroad dovish context, rather than hawkish
· … but respondents see market as expecting just over 50% probability that 2016 hike is indicated in speech
· Almost 50% see higher EM as the outcome, but much more split on G10 outcomes
· If she delivers a dovish long term message but signals one 2016 hike investors expect to:
o Buy EM
o Buy S&P
o Buy10s
o Sell 2s
o A couple of respondents would buy EM debt or other parts of the US yield curve
· Less than 10% think Yellen will endorse a higher inflation/nominal GDP/price level target, but 25% think she will refer to inflation asymmetry. Remaining 2/3rd expect her to stick to 2%
· 29% think they will change their targets in the next two years (but not necessarily signaled at Jackson Hole); 50% think the targets will change only if there is a recession
We had almost 350 responses – about 40% came from the leveraged community, 21% real money, 23% Citi colleagues, 5% corporate and a smattering of central bankers and others. (citi)
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