Three strategists dive into the latest insights from the Fed meeting and tariff announcements, predicting a decline in Treasury yields as labor data worsens. They highlight a healthy funding market, pointing out the influence of stablecoins on T-bill dynamics and swap spreads. Discussions touch on the impact of regulatory changes and macroeconomic factors on inflation, framing a complex picture of the financial landscape. With cautious optimism, they consider how these trends may signal a shift in market sentiment.
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insights INSIGHT
Fed's Hawkish Yet Patient Stance
Fed Chair Powell's post-meeting tone was slightly more hawkish but consistent with prior messaging.
Treasury yields expected to fall later due to labor market deterioration and Fed easing.
insights INSIGHT
Stable Funding Markets Outlook
Funding markets are stable with consistently lower SOFR and repo rates.
Fed's planned early settlement operations will enhance repo facility effectiveness and support soft conditions.
insights INSIGHT
Stablecoins Could Boost T-Bill Demand
Money funds hold 40% of T-bill market while stablecoin issuers own about 2%.
Stablecoin market share could grow to 5-10% if stablecoin legislation passes this year.
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US Rates strategists Phoebe White, Teresa Ho, and Ipek Ozil discuss their takeaways from this week's Fed meeting and tariff announcements. With a deterioration in labor market data still likely to drive Fed easing later this year, Treasury yields are expected to fall over coming months. Meanwhile, funding markets remain healthy, and stability has returned to swap spreads.
Speakers:
Phoebe White, Head of US Inflation Strategy
Teresa Ho Gentile, Head of US Short Duration Strategy
Ipek Ozil, Head of US Interest Rate Derivatives Strategy
At Any Rate