Premia Partners’ Post

Financial markets are falling into line with the Federal Reserve’s outlook for US interest rates, as stubborn inflation data forces investors to relinquish their bets on extensive cuts this year. This month traders have slashed their bets on the number of times the Fed will cut rates in 2024, from six in January to a current level of four. They have also pushed back their expectations of when those cuts will begin, from March to June. #federalreserve #interestrates

Feb 4, 1994: Without warning, just as investors poured billions into bonds, the Fed raised short-term interest rates for the 1st time in 5-years. By year-end, the Fed had hiked short-term rates by 2.5 percentage points, and Treasury bonds lost 7.8%, their worst return since 1967. Keeping an eye on bonds: https://lnkd.in/g_9dvmgX

The U.S. Federal Reserve (Fed) left the target range for the fed funds rate unchanged at the conclusion of its April 30-May 1 monetary policy meeting. While the decision was widely anticipated, investors were keen to learn how monetary policy may evolve from here on out. Specifically, a string of higher-than-expected inflation readings has led to concerns that the Fed’s next move could be a policy rate hike. Read the latest report from Scotia Wealth Management on our website. https://lnkd.in/gT-8zm_F #yyc #calgary #wealthmanagement

The U.S. Federal Reserve (Fed) left the target range for the fed funds rate unchanged at the conclusion of its April 30-May 1 monetary policy meeting. While the decision was widely anticipated, investors were keen to learn how monetary policy may evolve from here on out. Specifically, a string of higher-than-expected inflation readings has led to concerns that the Fed’s next move could be a policy rate hike. Read the latest report from Scotia Wealth Management on our website. https://lnkd.in/gSWfczzN #yyc #calgary #wealthmanagement

After the Federal Reserve Board's 50 basis point rate cut this month, what comes next? This chart uses the Adrian, Crump, and Moench (ACM) model to analyze Treasury yields. A simplified explanation of the utility of this model: It aims to visualize the "term premium" -- i.e., what investors demand to "lock up" their money in 10-year securities rather than rolling over short-term bills. (CEIC offers our users this ACM Term Premia dataset.)

The Federal Reserve maintained interest rates at 5.25%-5.50% and announced a slowdown in its balance sheet reduction, marking a significant pivot in its monetary strategy. Starting June 1, the Fed will lower the cap on maturing Treasury securities from $60 billion to $25 billion monthly, while maintaining the $35 billion cap for mortgage-backed securities. This cautious approach reflects concerns over recent inflation trends and economic balancing efforts. With traders eyeing potential rate cuts as soon as November, Fed Chair Jerome Powell underscored that a rate hike is off the table for now. https://lnkd.in/d-QXP8tk #FederalReserve #EconomicPolicy #InterestRates #InflationControl #FinancialMarkets

The Federal Reserve's May 1st decision to keep interest rates unchanged met expectations, with a hawkish stance on interest rate policy but a dovish approach towards reducing the balance sheet. The Fed's policy statement emphasized ongoing higher-than-expected inflation and adjusted economic activity language to reflect more robust growth. Despite a hawkish tone suggesting longer high interest rates, the actual tapering of the balance sheet was less aggressive than anticipated, reducing treasury bond redemptions to $25 billion a month, slightly below market expectations. Fed Chairman Powell's remarks were not overly hawkish and aimed to reassure the market, emphasizing the unlikelihood of an imminent rate hike and addressing concerns about stagflation. Overall, the Fed's decisions and Powell's comments provided surprises but did not shock the market, offering reassurance to investors.

https://lnkd.in/gQ-iYEV9 Expectations for inflation over the next decade as measured by Treasury Inflation-Protected Securities (TIPS) increased after the Fed's announcement on Wednesday, with the 10-year breakeven inflation rate rising to 2.16% on Thursday, its highest since early August. It hit a new high of 2.167% on Monday. #bonds #interestrates #fixedincome

After the Federal Reserve Board's 50 basis point rate cut this month, what comes next? This chart uses the Adrian, Crump, and Moench (ACM) model to analyze Treasury yields. A simplified explanation of the utility of this model: It aims to visualize the "term premium" -- i.e., what investors demand to "lock up" their money in 10-year securities rather than rolling over short-term bills. (CEIC offers our users this ACM Term Premia dataset.) Investors who expect interest rates to rise will want more premium. Indeed, we can see that the premium went into positive territory for much of the inflation and rate-hiking cycle of 2022. For much of the past two years, however, the premium was in negative territory -- implying that lower rates were seen as likely, an expectation that took a long time to come true. We've charted this against a more widely known forward-looking gauge: the Fed's probability of raising or lowering rates -- calculated as a weighted net balance of probabilities of Fed Fund rate changes by CME Group. After the Fed's bold rate cut, term premia are at their lowest in 20 years -- indicating more rate cuts are seen as likely. 𝗔𝗰𝗰𝗲𝘀𝘀 𝘁𝗵𝗲 𝗰𝗵𝗮𝗿𝘁 ➡️https://hubs.la/Q02RHLDx0 𝗔𝗿𝗲 𝘆𝗼𝘂 𝗶𝗻𝘁𝗲𝗿𝗲𝘀𝘁𝗲𝗱 𝗶𝗻 𝗖𝗘𝗜𝗖’𝘀 𝗹𝗲𝗮𝗱𝗶𝗻𝗴 𝗮𝗻𝗮𝗹𝘆𝘁𝗶𝗰𝗮𝗹 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀? ➡️ https://hubs.la/Q02RHDpK0 #Treasuries #FederalReserve

Following the Federal Reserve's 50 bps cut in the fed funds rate, the bond markets have seen a rise in yields, with the 10-year US Treasury up around 40 bps from its yearly low just a few weeks ago. What happened? Stronger than expected economic data led to increased uncertainty regarding how much the Fed will cut rates in November and December. According to CNBC, traders are pricing in an 89% chance of only one 25 bps cut by the end of the year.