Macro Horizons
January Drift
Jan 19, 2024
Discussion on recent developments in the US rates market, including potential delay in rate cuts. Exploring the Federal Reserve's monetary policy and market expectations of a rate cut in March. The impact of Fed actions on financial conditions and real estate market. Ongoing risks in Yemen and China's recovery and their impact on oil prices and the US rates market. Close monitoring of market trends and challenges in underwriting supply.
20:12
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Quick takeaways
- Strong consumption in Q4 and a resilient real economy reduce the odds of a rate cut until the second quarter.
- Global uncertainties and cross-currents make the future direction of the US rates market uncertain.
Deep dives
Higher than expected retail sales print suggests resilience in the economy
The Treasury market received a meaningful input for the debate over the Fed's rate cut in March with a higher than expected retail sales print for December. This suggests strong consumption in Q4, pushing real GDP trackers above 2%. Combined with solid payrolls and core CPI numbers, the real economy appears resilient, reducing the odds of a rate cut until the second quarter. This resulted in price action in the futures market reflecting the reduced probability of a rate cut in March.
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