Macro Horizons
Perils of Proactive
Dec 15, 2023
This podcast analyzes the recent developments in the US rates market and the shift in the FOMC's 2024 projection. It explores the Fed's considerations on interest rate cuts and their efforts to manage a soft landing in the economy. The discussion also covers the Fed's dovish stance, market rally, potential consolidation, and the recalibration of the Treasury market, auctions, and inflation expectations.
20:03
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Quick takeaways
- The Federal Open Market Committee (FOMC) signaled intentions to cut rates by 75 basis points in 2024, leading to a bullish response in the treasury market.
- The Fed's dovish pivot reflects the trend in employment and inflation data, with the committee proactively cutting rates to achieve a soft landing and re-anchor inflation.
Deep dives
FOMC signals rate cuts in 2024, market responds bullishly
The Federal Open Market Committee (FOMC) signaled intentions to cut rates by 75 basis points in 2024, leading to a bullish response in the treasury market. 10-year yields dropped below 4%, creating a constructive setup for a year that is expected to feature rate cuts. Although New York Fed President Williams tried to moderate the market's perception, the bond bullish price action remained intact. However, the bond market may exhibit low liquidity and choppiness in the final two weeks of December, historically characterized by a lack of conviction.
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