Day one of Warsh's first FOMC, and the tape is handing him a gift he didn't ask for.
Crude is cracking. WTI is down another leg to ~$80.75 and Brent to ~$83 — a three-month low — as the war premium bleeds out of oil on the US-Iran breakthrough, with a signing set for Friday in Geneva. WTI's year-to-date gain has compressed from ~48% to ~41% in two sessions. That matters more for the rates market than the equity record everyone's watching: it's a clean disinflationary impulse landing the same week the Committee meets. Futures desks have already pared their tightening calls — a December move that looked live against 4.2% headline CPI is now closer to a coin toss. The oil collapse is doing part of the Chair's job for him.
So tomorrow's question flips. Does Warsh take the disinflationary gift and let the data carry a dovish lean — or use his first meeting to plant a hawkish flag regardless of where crude trades? The case for what he reshapes first is in Saturday's Weekend Read; today is about the tape he's sitting down to.
And the tape is oddly calm. US Treasuries are anchored — 10-year ~4.45–4.48%, 2-year ~4.06%, the long bond holding just under 5% at 4.95%. The curve flattened a touch into the event: 2s10s slipped under 40bp, 5s30s near 78bp. No hike panic at the front, no term-premium spasm at the back — frozen, waiting for 2:00pm Wednesday. The move today is offshore: Canada richer ~3bp across the curve, China lower, European bourses at fresh highs on the same oil-and-rates relief, while the US sits still as the anchor.
Credit is the part to watch precisely because nothing's moving. High yield ground tighter again — broad OAS in to 271bp, BB at 162 — and the index looks asleep. But look underneath: CCC OAS is sitting at 948bp. The benign headline is masking a blown-out low-quality tail. IG and BB priced for perfection, CCC priced for trouble — that dispersion is the kind that doesn't matter until it suddenly does.
Zoom out and the six-month scoreboard says what the tape says: duration's been dead money — the 3-to-10-year belly is negative, the long end barely positive — while convertibles, EM, and carry-rich credit did the work. Nothing in today's setup argues for stepping in front of that into the print.
The supply event is today, not tomorrow. Treasury reopens the 20-year — $13B, 1:00pm — the market's least-loved tenor, priced into a risk-on, oil-collapsing, pre-Warsh tape. The tail and the dealer take are a live read on duration appetite the afternoon before the decision: a clean stop says the bid is real even with the Chair unknown; a sloppy one says nobody wants to own the long end blind into Warsh.
Net: the pressure rotated rather than fell. Oil relief pulled some air out of the rates side; the 20-year and tomorrow's binary put it right back. The whole number is hostage to 2:01pm.
Pressure Gauge — Tuesday, June 16 Duration 6 ↓ · Curve 6 → · Supply 7 ↑ · Credit 3 → · Composite 6.0 → Higher = more pressure / more fragility. Duration eased as the oil break pared hike bets; supply rose with the 20-year pricing today; credit asleep at the index, but the 948bp CCC tail is the divergence. Level unchanged, composition rotated.
Published by Rich Petruzzo, CFA. Informational and educational only — not investment advice or a solicitation, and not individualized. Views are the author's own as of the publication date and not those of CFA Institute. Data believed reliable but not guaranteed; past performance is no guide to future results. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.