Surprisingly Calm Reaction to Surprisingly Similar Fed Rate Projections
Wed, Mar 20 2024, 4:32 PM
With so much apparently at stake heading into today’s Fed events, the reality ended up being somewhat underwhelming. At least it was underwhelming in a good way for the bond market and rates. The key revelation was a Fed dot plot (individual projections for the Fed Funds Rate) that showed the exact same median rate at the end of 2024 as seen in the last dot plot (3 rate cuts still penciled in this year). Bonds cheered the news at first, but then got defensive ahead of Powell’s press conference. Powell navigated questions without prompting any more panic–essentially convincing investors that the Fed was approaching incoming data with with a certain level of optimism regarding inflation returning to the late 2023 trend (as opposed to the early 2024 trend of higher readings). Bonds ended up basically threading the needle with modest gains by the end of the day.
09:38 AM
Initially stronger overnight on EU inflation data, but steadily rising since then. 10yr unchanged at 4.293. MBS down 1 tick (.03)
01:25 PM
Slightly stronger ahead of Fed. MBS up an eighth. 10yr down 1.8bps at 4.275
02:32 PM
2 way reaction after Fed announcement. Now slightly weaker heading into the press conference. 10yr up 1.1bps at 4.304. MBS still up an eighth of a point.
03:25 PM
Bonds settling down in slightly stronger territory with MBS up 7 ticks (.23) and 10yr yields down 1.6bps at 4.277.
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