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Quiet Start to the Week Ahead of the Fed

US stocks fluctuated while Treasuries rallied marginally as markets continued to take direction from oil and braced for this week’s FOMC meeting.  Oil traded under pressure on news that Iran won’t agree to freeze production until it doubles its post-sanctions output.  Iran’s oil exports are expected to reach 2 million barrels per day on March 19, up from 1.75 million in the month prior.  Iranian Oil Minister Bijan Zanganeh said “they should leave us alone as long as Iran’s crude oil has not reached four million.  We will accompany them afterwards”.  OPEC and non-OPEC producers were scheduled to meet in Russia next week to continue discussions on a possible output freeze, but they are now not likely to meet again until mid-April.  WTI and Brent crude fell 3.5% and 2%, respectively.

There are no significant US data reports out today, but the data flow picks up over the next couple of days, headlined by Retail Sales and CPI.  In addition to the data, central banks will continue to play a large role in market sentiment this week as both the Bank of Japan and Federal Reserve are in action following last week’s ECB meeting and QE actions.  The BoJ is considered more likely than the Fed to announce a change in policy after markets reacted poorly after the BoJ’s negative interest rate policy announcement 6 weeks ago.  Rather than further reducing rates, market pundits believe the BoJ will increase its monthly asset purchase program known as QQE.

All three major US stock indices are currently trading nearly unchanged, while Treasury yields and swap rates are 1 to 4 bps lower across the curve.

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