US TSYS: Treasuries hold a tight lower range, well actually a hair-thin lower
range after drifting lower since about 10am ET. Range-trade will likely remain in place until Wed. 2p ET FOMC meeting outcome statement.
The Federal Reserve is likely to announce Wednesday the start of its plan to slowly and passively pare its massive bondholdings. Here are answers to three of the most commonly asked questions from our readers about how it works. Q: OK, I know the Fed accumulated the holdings by buying bonds.
Earnings growth' largely independent of central bank actions': Schwab's Kleintop. Corporate earnings, not central banks, are the real driver of the global equity rally, so there's no point losing sleep over the imminently expected unwinding of the Federal Reserve's balance sheet, according to Jeffrey Kleintop, chief global investment strategist at Charles Schwab. The Fed is widely expected to begin slowly unwinding the $4.5 trillion portfolio of bonds and other assets it...
U.S. stocks inched higher Tuesday, as investors braced for the Federal Reserve's policy decision this week. The Dow Jones Industrial Average gained 43 points, or 0.2%, to 22374 in recent trading. The S&P 500 added 0.1%, while the Nasdaq Composite rose 0.2%.
US TSYS: Here's a refresher if you can't remember what the Fed previously said
on its Q/E unwind/Fed balance sheet reduction, which will likely be detailed Wed for enactment in October.
- The Fed in June spelled out of the gradual unwind. Up to $6 billion of Treasuries and $4 billion of MBS per month that mature will not be reinvested.
The combined monthly cap will then rise by $10 billion at three-month intervals over the next 12 months until it reaches a ceiling of $50 billion per month.
However the New York Fed has projected that actual runoff amounts are not likely to reach these preset caps in most months as less debt is due.
U.S. government bonds bounced around the flatline Tuesday as the Federal Reserve began its latest meeting. Yields were steady as investors anticipated that the Fed will announce a plan to trim its balance sheet as part of its effort to return monetary policy to a non-crisis footing. The yield on the benchmark U.S.
US TSYS: Traders said quiet action will reign in Tsys today and until Wed 2pm ET
FOMC meeting outcome and Wed 2:30pm ET Fed Chr Yellen news conference; they will be watching about Fed balance sheet reductions (presumed to start in Oct.) but
also with intense focus on what FOMC/Yellen will say on Dec. rate hike odds in their comments. "The market is more concerned about the Fed, and wants to see
what they say about December tightening," said one trader. "We also want to hear
the Fed Chr Yellen's current thoughts on inflation: the Fed is so afraid of
deflation." - In other markets, US stocks are mushy, trading narrowly mixed, as are the
European stock markets, following Japan's Nikkei stock index 1.96% gain Tues and
-0.29% China CSE 300 stock index decline.
US TSYS: Treasuries are mildly weaker, quiet two-way flows after brief blip
upward as US Pres. Trump said that if the US or allies were "attacked" by
N.Korea, it will "destroy" N.Korea but would prefer to solve the conflict by
other means. - Traders eyed accounts that "want to sell above the market" but the Tsys are
not going toward their higher price levels so "the market is not going
anywhere."
EGB SUMMARY: Core European markets struck a slightly firmer note earlier on
Tuesday particularly around the time of the it really needed the US market to open to make most of their gains. However, many of those gains were surrendered
in the European afternoon as investors continued to reduce long positions ahead of the FOMC meeting on Wednesday.
- Bunds also weakened alongside Treasuries as President Trump gave a bombastic speech to the U.N. Heading into the close the Bund yield was just 0.6bp lower at
0.45%. Trump again threatened to destroy Kim Jong-Un if he threatened America. - Within the periphery, Spanish debt performed strongest despite the impending
supply on Thursday. - The Bund-Bonos spread was 2bp lower on the day to 111bp and the Bund-BTP
spread was just 1bp tighter. - In preparation for tomorrow's 30Y Bund auction, the existing Bund 2.5% 2046
cheapened further to the 2044 maturity Bund. - Data was limited to a slightly better than expected ZEW survey.
US TSYS: Treasuries drifting slightly lower, 10Y yield is at 2.232%, vs. 2.234%
session high yield. Tsys saw mild 2/30Y flatteners and light 5/30Y and 2/10Y
steepeners. - Pres. Trump said the goal is to help Venezuela people "restore
their country" from its "authoritarian" leaders; asked UN members to aid to
address the "crisis" in Venezuela.
News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.
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