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Bond Market News
FOMC Cuts Rates by 25bp As Expected
November 8, 2024
US Treasury yields eased further, with the 2Y down 5bp and the 10Y down 9bp. The FOMC cut interest rates by 25bp, inline with expectations with the Fed Funds range now at 4.50-4.75%. Fed Chairman Jerome Powell said that they will continue assessing data to determine the “pace and destination” of interest rates. Regarding changes in the latest Fed statement as compared to its September release, the new statement slightly altered the reference to inflation. It said that price pressures had “made progress” towards the Fed’s objective vs. the prior language that it had “made further progress”. US IG and HY CDS spreads tightened by 0.9bp and 5bp respectively. Looking at US equity markets, S&P and Nasdaq both closed higher again, by 1.5% and 1.1% respectively.
European equities ended mixed. In terms of Europe’s CDS spreads, the iTraxx Main and Crossover spreads tightened by 1.6bp and 12bp respectively. Asian equities have opened broadly lower this morning. Asia ex-Japan CDS spreads tightened by 2.8bp.
New Bond Issues
- Nanxun Communications $ at 6.2% area
New Bond Pipeline
- People’s Republic of China Ministry of Finance hires for $ 3Y/5Y bond
- Singapore Medical Group hires for S$ 5Y bond
- Tata Capital hires for $ bond
Rating Changes
- Fitch Upgrades Gran Tierra’s Ratings to ‘B+’; Removed from RWP; Outlook Stable
- Moody’s Ratings changes Mineral Resources’ outlook to negative; affirms Ba3 ratings
Term of the Day: Fed Funds Rate
This is the policy interest rate set by the US Federal Reserve based on their monetary policy. This is the rate at which banks lend to each other federal funds (money that banks deposit at Federal Reserve banks) for the purpose of maintaining reserves (statutory and excess) at the Fed. Banks with excess funds typically lend them overnight to other banks that are short on funds, rather than leaving those funds in their non-interest bearing reserve accounts at the Fed or as idle cash. These transactions are uncollateralized but are considered the risk-free rate since the money is held with the Fed overnight.
Talking Heads
On Investors’ Reaction to Trump’s Win
Jordan Rochester, Mizuho
“It’s going to be a strong year for those good at trading headlines, and a difficult one for those not used to following Trump tweets”
Ryan Grabinski, Strategas Securities
“The biggest takeaway from last night is that we received certainty that the market craves. This will allow both business and consumer confidence to improve”
Dave Lutz, JonesTrading
“The current moves in equities, bonds and other assets could partially reverse if the House goes Democrat, which remains to be seen”
On Warning of ‘Huge’ Impact of Trump Tariff Plans – ECB Vice President, Luis De Guindos
“If a jurisdiction as important as the US imposes tariffs of 60% to any other important jurisdictions…China… assure you that the direct effects and the indirect effects and the deviations of commerce will be huge… we will incorporate into our projections the trade policy that is announced by the new US administration”
On US Bond Yields Surging as Trump Win Stokes Inflation Expectations
Stephen Dover, Franklin Templeton
“The bond market anticipates stronger growth and possibly higher inflation. That combination could slow or even halt anticipated Fed rate cuts”
Lawrence Gillum, LPL Financial
“Move higher in yields is a concern from the bond market that Trump’s economic policies could be inflationary… could potentially complicate the Fed’s ability to cut rates “
Michael Schumacher and Angelo Manolatos, Wells Fargo
“We think Treasury yields are near a peak”… those “who had been contemplating adding duration but wanted to wait for the election results should get ready to act”.
Top Gainers & Losers 08-November-24*
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