The bond market is speaking loud and clear, but is the Fed listening?
Jun 20, 2019
- The bond market is making its demands very clear-cut and cut soon!
- Fed President Powell made clear yesterday the Fed is ready to cut if necessary
- Futures markets are already pricing in a 25 bp cut at the next Fed meeting in July-could that happen?
- For those who watched Chairman Powell answering questions after the decision, he did not seem necessarily to be in a hurry to cut
- The Fed removed “patient” from its statement describing its policy approach, animating the bond market
More posts on the US markets
Can you see that in the distance? It's a Fed rate cut coming....for now Fed leaves rates unchanged
Freaky Friday and Manic Monday are coming-Quadruple Witching followed by S&P500 Rebalancing
How well are stock investors positioned for downside? Better than it appears...
- But when the Fed met, only 8 members of 17 see a rate cut by the end of 2019
- The bond market, however, seems to have other ideas, already expecting a cut next month
- In fact, futures market is pricing in 75bp of cuts by the end of 2019 in the wake of the most recent Fed statement
- The US Treasury market, at $16 trillion, has a way of getting what it wants and seems clearly to know what it wants: lower rates
- Fed members, though, are divided, with over half not even expecting a cut in 2019
- Analysts are also not as convinced as the bond market with rate cut expectations for 2019 varying wildly
- The Fed hiked rate multiple times in 2018 and has not cut rates in over 10 years
- Most agree, though, the question on a rate cut is not if, but when