| Jackson Hole kicks off, delta fallout grows, and Afghanistan situation worsens. Throughout the summer, the market mantra has been "wait for Jackson Hole" when thinking about just when the Federal Reserve will taper asset purchases. Well, today is the day when Fed Chair Jerome Powell makes his speech in which he is expected to provide strong guidance that the bank will start reducing asset purchases before the end of the year. There is still plenty of uncertainty about how far he can commit to the timing as the delta variant clouds over the economy, even though the expansion only a month ago was seemingly roaring ahead. Those economic clouds are clear from the latest data on hospitalizations in some U.S. states, with the number of people currently admitted for treatment in Texas hitting 13,928 on Tuesday — close to an all-time record. An increasing number of states are reintroducing mask mandates as the CDC reported 5,665 deaths from the disease in the week ending Tuesday. The Supreme Court, in a split decision, lifted the Biden administration's moratorium on evictions. A study has shown that people who have previously had Covid-19 are better protected from new infection than those who got two doses of the Pfizer Inc. vaccination. Yesterday's deadly attacks at Kabul airport will not derail the the U.S. evacuation effort, said President Joe Biden, while promising to hunt down those responsible for the attacks. Despite warnings of further violence, large crowds are again outside the airport trying to get out of the country. Most countries have already ended or are about to end efforts to evacuate people amid the rapidly worsening security situation. House Minority Leader Kevin McCarthy called for Congress to return to address the situation, while in Afghanistan, the Taliban leadership is holding meetings to prevent the country falling back into the civil war that erupted in the 1990s. Global equity gauges are generally quiet as investors sit on their hands ahead of today's Powell speech. Overnight the MSCI Asia Pacific Index was broadly unchanged while Japan's Topix index closed 0.3% lower. In Europe the Stoxx 600 Index was flat at 5:50 a.m. Eastern Time. S&P 500 futures pointed to a move higher at the open, the 10-year Treasury yield was at 1.337%, oil rose and gold gained. U.S. personal income and spending data for July is at 8:30 a.m. The PCE deflator for the month is expected to tick higher to 4.1% when the number is released at 8:30 a.m. Wholesale and retail inventories and the advanced goods trade balance are at that time. Powell's speech is at 10:00 a.m. The latest University of Michigan sentiment data is at 10:00 a.m. and the Baker Hughes rig count is at 1:00 p.m. Earnings today includes Big Lots Inc. Here's what caught our eye over the last 24 hours. Happy Jackson Hole! Federal Reserve chief Jerome Powell takes the (virtual) stage at 10 a.m. Washington D.C. time today. By about 10:30 am, investors around the globe should have a fairly good idea of whether or not the central bank will began tapering large-scale asset purchases this year or next.
While Powell has been steadfast in his patience, the hawks are circling. On the symposium's eve, three of the Fed's leading hawks -- Dallas Fed president Robert Kaplan, St. Louis's James Bullard and Kansas City Fed's Esther George — conveyed a common message: policy makers should begin tapering sooner rather than later, even as the delta variant's spread threatens to impede the economic recovery. "I think it's important to get started and the conditions of pace, timing of when we end, I'm open minded to listening to the debates around that," George said in a Bloomberg TV interview with Michael McKee. "But I am less interested in deferring that decision."
None of the trio are currently voting members of the Federal Open Market Committee, but that will change next year for George and Bullard. And remember, the minutes from the Fed's July meeting showed that most policy makers see the taper process kicking off this year. Which side of the line Powell chooses to toe remains to be seen. But in any case, the biggest moves in the Treasury market on Friday might boil down to the options market. As reported by Bloomberg's resident rates expert Edward Bolingbroke, more than 2 million options in the September 10-year contract expire by the end of trading Friday. That amounts to a whopping 63% of the total options open interest in Treasuries. As of Wednesday's close, most of the risk is concentrated around several options structures that equate to 10-year yields of about 1.5%, 1.34% and 1.21%. Currently, the benchmark rate is hovering near 1.34%. So, we could see some fireworks around those levels. As Bolingbroke explains it:
"Those levels stand out as having potential to sway trading in the aftermath of Powell's speech, should dealers and option holders trim their vulnerability to market movements leading up to the options expiry and move the price of 10-year futures close to the strike price."
It's worth pointing out how remarkably clean positioning is at the moment. JPMorgan Chase data show that after whittling down short bets, the bank's clients are close to the most neutral stance in months. Additionally, the options skew -- representing the relative appetite for put and call options on 10-year notes -- has been mostly calm. Follow Bloomberg's Katie Greifeld on Twitter at @kgreifeld Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
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