|Day's Range||1.7440 - 1.8050|
|52 Week Range||1.4290 - 3.2480|
President Donald Trump accused the central bank and Fed Chair Jerome Powell of having “no guts” for not meting out a more aggressive cut.
The Fed 2-day meeting wraps today with an expected rate cut announcement from Jay Powell. Yahoo Finance's Julie Hyman, Adam Shapiro, Krishna Memani, Invesco Vice Chair of Investments and Danielle DiMartino Booth, Quill Intelligence CEO and Chief Strategist discuss.
The New York Fed said it would conduct an overnight repurchasing operation for the third time this week at 8:15 a.m. Eastern on Thursday. The U.S. central bank will offer up to $75 billion of repos, temporarily buying securities from Wall Street dealers to inject liquidity into the system. Earlier this week, a surge in the repurchasing rate, used by hedge funds and banks to fund their trading operations, pushed the fed funds rate above its target range. Fed Chairman Jerome Powell said in a Wednesday press conference that the central bank would stand ready to use its current tools to address pressures in money markets.
U.S. Treasury yields come off their intraday lows on Wednesday after the Federal Reserve’s policy statement highlights the divisions within its policy making committee on the need for additional rate cuts after September.
Treasury yields remained lower after the Federal Reserve cut its benchmark interest rate by a quarter point to a range between 1.75% to 2.00%, as expected. The 10-year Treasury note yield slipped 5.3 basis points to 1.761%, while the 2-year note yield was down 4.9 basis points to 1.688%. Bond prices move in the opposite direction of yields. But three voters on the Federal Open Market Committee dissented against the rate cut. The majority of Fed officials anticipated no further rate cuts this year, with the minority forecasting another reduction.
The U.S. Federal Reserve cut interest rates again on Wednesday to help sustain a record-long economic expansion but signaled a higher bar to further reductions in borrowing costs, eliciting a fast and sharp rebuke from President Donald Trump. Describing the U.S. economic outlook as "favorable," Fed Chair Jerome Powell said the rate cut was designed "to provide insurance against ongoing risks" including weak global growth and resurgent trade tensions. "If the economy does turn down, then a more extensive sequence of rate cuts could be appropriate," Powell said in a news conference after the Fed announced it had lowered its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.75% to 2.00%.
The fed funds rate traded on Tuesday 5 basis points above the upper bound of its target range between 2.00% to 2.25%, according to Federal Reserve data released Wednesday morning. The recent climb in overnight repurchasing rates, used by hedge funds and other leveraged investors to finance their trading operations, has resulted in a knock-on increase in the fed funds rate. Since both are short-term sources of funding, a rise in the overnight repurchasing rate means that borrowers in fed funds have to pay up to attract investors. The fed funds rate pushing above its target range underlines analysts' concerns that the U.S. central bank is having trouble keeping its benchmark interest rate at its desired levels. The Fed launched $75 billion of overnight repos on Wednesday morning, in order to inject liquidity bank into the system and to bring the fed funds rate in line within its preferred range. This is the Fed's second repo operation this week.
The New York Fed held an overnight repurchasing operation for the second time this week on Wednesday morning. The U.S. central bank carried out the full $75 billion of repos, temporarily buying securities from Wall Street dealers to inject liquidity into the system. Earlier this week, a surge in the repurchasing rate, used by hedge funds and banks to fund their trading operations, pushed the fed funds rate close to the top of its targeted range. The incident stirred worries that the central bank is at risk of losing its grip over its benchmark interest rate.
Bond investor Jeffrey Gundlach said the Federal Reserve will take the disruption in short-term money markets as a warning sign.
U.S. Treasury yields retreat on Tuesday as investors as investors gear up for the Federal Reserve’s policy decision on Wednesday, from which a quarter percentage point interest rate cut is expected.
Technically speaking, the major U.S. benchmarks have weathered a September oil shock against a still comfortably bullish bigger-picture backdrop, writes Michael Ashbaugh.
The New York Federal Reserve bank said it was carrying out up to $75 billion worth of repuchase agreements, or repo, on Tuesday between 9:30 a.m. Eastern to 9:45 a.m. They said the move would help bring back the central bank's benchmark interest rate, or the federal funds rate, back to its target range of between 2% to 2.25%. Market participants have complained this week that a lack of liquidity in funding markets has pushed the fed funds rate above the interest rate on excess reserves, and that the central bank had lost its grip over short-term interest rates. Analysts say the repurchase operations will boost reserves at banks and help ease funding pressures.
Treasury yields fall Monday, reversing a chunk of last week’s surge, after an attack on Saudi Arabian oil production facilities sends oil prices higher.
Investors are shunning higher-priced, sturdier stocks in favor of those that may have missed out on the love earlier in the year.
A drone attack on Saudi Arabian oil facilities underlines how global geopolitical risks have continued to draw flows into haven assets.
What’s left for the Federal Reserve to do at its rate-setting gathering next week now the U.S.’s main stock indexes are on the cusp of records again ?
(Bloomberg Opinion) -- September is only halfway done and already the S&P 500 Index is up 20% for the year. This is a remarkable achievement, given that earnings growth has stalled and the bond market is pricing in almost a 40% chance of a recession over the next 12 months. That just shows the degree to which lower interest rates have supported stocks. And yet, as is often the case in life, too much of a good thing isn’t always, well, good.This year’s rally – during which the S&P 500’s forward price-to-earnings multiple expanded to 17.6 from 14.5 at the start of January – can be credited to the Federal Reserve’s dovish pivot, which led to the central bank’s first rate cut since 2008 and sparked big declines in market rates. The yield on the benchmark 10-year Treasury note dropped to as low as 1.43% earlier this month from 2.80% back in January.Simple discounted cash-flow analysis shows how lower rates make future earnings more valuable now, justifying higher multiples for equities even without profit growth. So, logic would dictate that the lower rates go, the better for equities. But the experience in Europe shows that there comes a point where ever lower rates begin to work against stocks.In a research note last week, the strategists at Bank of America pointed out how even though 10-year bond yields in Germany have fallen below zero, stocks there only trade at a multiple of about 14 times earnings. That’s little changed from mid-2014, when yields were around 1.25% and the European Central Bank cut its benchmark deposit rate to below zero. The same is true for the broader euro zone, with the Euro Stoxx 600 Index trading at 14.5 times projected earnings, not much different from mid-2014.Of course, the euro zone’s struggles are worse than the U.S. Still, the increasing globalization of the world economy means America is having a much harder time shrugging off the slowdown elsewhere. Morgan Stanley says the U.S.’s share of global gross domestic product has shrunk from 22% in 1990 to 15% today. That’s a big reason traders are pricing in at least three more Fed rate cuts over the next 12 months, bringing its target rate for overnight loans between banks to 1.50% from 2.25% currently.On top of that, the number of Wall Street strategists slashing their Treasury yield estimates has grown in recent weeks, citing the outlook for weaker global growth and inflation. UBS Group AG and BNP Paribas SA, which are among the select group of dealers authorized to trade with the Fed, both slashed their 10-year forecasts, predicting yields will drop to 1% by the end of 2019. Could yields go even lower, tracking those in Europe and Japan by following below zero? Former Fed Chairman Alan Greenspan doesn’t thing that’s a crazy idea, telling Bloomberg News last month that he wouldn’t be surprised if they turned negative.It’s true that the stock market posted a massive rally between early 2009 and mid-2015, rising as much as 215%, as the Fed kept rates near zero and pumped money directly into the financial system via quantitative easing. But that was a time when investors largely believed that central banks still had a lot of arrows left in their quivers to stimulate the economy. That’s not really the case now. The S&P 500 fell four straight days after the Fed cut rates on July 31, dropping a total of 5.59%.Also back then, profits were in recovery mode and stocks were relative cheap, with the forward price-to-earnings ratio holding below 14 for much of that time and peaking at around 17 times in late 2014 – about where it is now - just before the S&P 500 turned in its first annual decline since 2008. This year, though, earnings growth is flat and Bank of America’s strategists are telling its clients that forecasts for an 11% increase next year are “too high.” Stocks have had a good run, with the S&P 500 closing last week at 3,007. The median estimate of strategists surveyed by Bloomberg in January only expected the benchmark to rise to 2,913 this year. But with economists moving up their time frame for when the next recession will hit to 2020 from 2021, earnings estimates coming down and price-to-earnings ratios on the high side, it won’t be easy for stocks to keep marching higher even if the Fed does continue to slash rates. To contact the author of this story: Robert Burgess at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Yahoo Finance's Julie Hyman, Adam Shapiro, Brian Sozzi, Ramsey Smith Alex.fyi CEO and Ed Al-Hussainy - Columbia Threadneedle Investments Senior Interest Rate and Currency Analyst discuss market action.