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Daily Agenda: Markets Focus on Yellen Speech

Economic data unclear on rate-hike possibilities; federal court clears way for suit against derivatives dealers; BOE cautions on mortgage debt.

With futures markets now pricing in the possibility of a Federal Reserve rate hike before the second half of 2016, a speech by Fed Chair Janet Yellen at the Economic Club of New York this afternoon will be a focus for investors. To date, consistent improvements in labor data has signaled that U.S. economic fundamentals remain resilient in the face of considerable macro headwinds currently weighing on global growth expectations. Despite hawkish comments by several regional Fed heads in recent weeks, the downward revision of gross-domestic-product forecasts by the Atlanta Federal Reserve research department lends weight to arguments for the bank to wait longer.

Court clears way for antitrust suits against banks. On Monday, a federal judge in the Southern District of New York ruled against a request by a group of banks to throw out investor claims relating to the so-called ISDAfix manipulation. The suit was brought by a group of investors who claim dealer banks colluded in setting the benchmark rate used to fix pricing for interest-rate swaps and other securities. Among the more than a dozen banks that will now face litigation, are Barclays and Bank of America.

BOE sounds alarms. On Tuesday, Bank of England policymakers announced an increase in the buffer rate for banks from zero to 0.5 percent of risk-weighted assets in a move designed to manage credit risk. BOE leaders have expressed concerns recently over the upcoming referendum on the U.K.’s status within the European Union. Separately, the prudential regulation authority, a BOE division, today issued guidelines to lenders encouraging a tightening of standards for residential mortgages for investment properties. The announcement comes after January lending data indicated a greater than 40 percent year-over-year increase in mortgage debt issued to landlords.

Mixed economic data from Japan. February unemployment data for Japan was weaker than anticipated, with the headline jobless rate at 3.3 percent. Meanwhile, a rise in household spending and retail sales for the month may have been driven in part by leap-year distortions. Separately, in comments to the media overnight, Prime Minister Shinzo Abe indicated that he is committed to fulfilling the 2017 value-added tax increase that he had pledged earlier.

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