Deep Dive on Today’s Misunderstood Fed Comments
Wed, Feb 19 2025, 4:30 PM
Today’s only potential big ticket event was the release of the minutes from the Fed’s most recent meeting (3 weeks ago). These weren’t very likely to cause a stir, but an odd inclusion caught the market’s attention. In not so many words, it had to do with the potential for the Fed to pause its balance sheet run-off (something that would technically create net buying demand in bonds) in order to maintain enough of a balance sheet cushion to accommodate volatility associated with Treasury’s account balance in the run up to the next debt ceiling showdown. While nothing has been decided yet, and while it would only be temporary, some traders viewed it as a short term opportunity and acted accordingly (by buying a few more bonds today).
- NY Fed Manufacturing
- 5.7 vs -1.0 f’cast, -12.6 prev
- NAHB Housing Market Index
- NY Fed Manufacturing
11:17 AM
Weaker overnight but bouncing back into positive territory in early trading. MBS up 2 ticks (.06) and 10yr down 0.1bps at 4.542
03:39 PM
Zero reaction to Fed minutes at first, but then some buying owing to the notion of pausing balance sheet run-off pending further clarity on the debt ceiling. MBS up 6 ticks (.19) and 10yr down 2.2bps at 4.53
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