Fed Takes a Softer Tone
Prior Week Summary
After a shaky start to the week, U.S. equity markets moved higher, capping an end to the best month for global equities in over seven years. A host of economic and geopolitical events drew the attention of market participants this week, none more so than the change in stance by the Federal Reserve. While the FOMC was widely expected to hold rates steady this week, the Federal Reserve signaled a more dovish path to monetary policy, hailing a “wait and see” approach to interest rate changes and indicating that the Fed is “prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.” The change in tone comes only 6 weeks after the Federal Reserve forecasted two interest rate hikes in 2019, largely due to “conflicting signals about the outlook.”
In economic news, the U.S. economy added 304,000 jobs in January, far surpassing the consensus estimate of 165,000 jobs. The Conference Board Consumer Confidence index fell, but updated readings on new home sales, manufacturing and construction spending beat analyst estimates.
The Look Forward
In a light week for economic data, in addition to the State of the Union, market participants will be awaiting updated weekly figures for durable goods orders, the trade balance and initial jobless claims. Additionally, $45 billion of 3-month Treasury Bills, $39 billion of 6-month Treasury Bills, $38 billion of 3-year Treasury Notes and $27 billion of 10-year Treasury Notes will be going to auction.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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