SignalPlus宏观分析特别版：FOMC会议
in short -The Committee does not believe it is appropriate to lower the interest rate target range until it is more confident that inflation can sustainably move toward 2% and [Powell] believes the Fed is unlikely to initiate a rate cut in March.
Yesterdays FOMC meeting and market price trends can be summed up in one sentence -Don’t expect an interest rate cut in March just yet. Although the Fed removed its interest rate hike bias from the official statement as expected, markets were caught off guard by the clear hawkish counter-comment, although what exactly greater confidence meant was unclear; in any case, it was Seen as the Feds direct denial of the markets growing expectations for easing policy, the OIS interest rate jumped 10 basis points from the lows (giving back the gains brought about by the earlier weak ADP and labor cost index), and the market expected the possibility of a rate cut. down to about 30%.
At the 2:30 press conference, Powell initially tried to balance the hawkish statement with the following comment:
Policy rates have entered restrictive territory.
“It would be appropriate to relax policy restrictions at some point this year.”
FOMC members are increasingly confident, but we would like greater confidence that inflation is easing.
We are not looking for better data, but we want to see better data persist.
On inflation, Powell noted that the composition of the inflation data is less important than the overall level of inflation, a response to the ongoing divergence between goods and services inflation.
However, at the end of the question and answer session at the press conference, the chairman made the following comments that completely destroyed the doves’ hopes:
There is no proposal to cut interest rates at this meeting.
There is still a long way to go to achieve a soft landing.
[Powell] “Thinks the Fed is unlikely to cut interest rates in March.”
The last comment served as a fatal blow. The 2-year U.S. bond yield rose by about 8 basis points, and the stock market plummeted by about 1.5% that day. It seems that the real 2024 has just begun.
In addition to the Fed meeting, there is other news worth watching. First, the highly anticipated bond issuance plan was fully in line with market expectations and had a easing effect on bond prices. Although the Treasury Department increased the size of the quarterly issuance for the third consecutive time, officials said this will be the last additional issuance in 2024, and the supply size ( Next week’s 3Y/10Y/30Y ($121 billion total) is fully in line with the pace set last November; in addition, Treasury also confirmed that it will announce new repos in the May refinancing announcement The start date of the program designed to assist with cash management and improve liquidity for non-current Treasury securities.
Regarding the term structure of bond issuance, the Treasury Department said it expects to maintain the current size of Treasury auctions at least until the end of the first quarter, and then reduce slightly in the next quarter. Regardless, the share of Treasury bills in total issuance will remain above the recommended range as the Treasury continues to sacrifice a degree of funding prudence to provide relief to the supply of longer-dated debt.
In other news, ADP weakened (+107k vs +158k last month), labor cost index (slowest annualized pace since 2021), Chicago PMI (46 vs 47.2) and New York Community Bancorp (a New York Regional Bank) announced a dividend cut due to large loan impairments, causing its stock price to plummet 40%.
The bank, which acquired part of Signature Bank last year, boosted its loan loss provisions as loans delinquent for more than 30 days jumped 48% in the fourth quarter and expectations for further softening in the commercial real estate market; bad debt write-offs totaled in the quarter Soaring to $185 million, more than the past 10 years of impairment losses combined, pushed the banks fourth-quarter net loss to $252 million, well below analysts expectations for earnings of $206 million, and announced cuts of about 70 % dividends to preserve cash.
While many credit analysts believe this is a stand-alone, stock-specific event, the ghost of March last year lingers in the minds of many, and the impending exit of the BTFP program in March will certainly do little to ease concerns. The U.S. KBW Bank Index once fell 5.5% that day, and the final closing decline narrowed to about 3%.
In the stock market, in addition to the panic caused by the hawkish Federal Reserve and NYCB, major corporate earnings reports were generally disappointing. AMD (-2.6% ), Samsung (-2% ), Google (-7% ), Microsoft (-2.5% ) and Disney (-2.5% ) all fell short of current high expectations. Technology, energy and consumer discretionary sectors led the index decline, but there was no widespread panic and the SPXs actual moves were largely lower than the VIXs implied moves.
In terms of cryptocurrency, the results of the FOMC meeting have not yet had a clear impact, but the latest court hearing news pointed out that FTX is expected to fully compensate its customers and will abandon its plan to restart FTX 2.0 because it is difficult to find a buyer. While the cryptocurrency industry has come under repeated attack from mainstream groups, the largest bankruptcies will now achieve equivalent payouts (based on dollars rather than tokens) than many venture capital, private equity secondary markets, Chinese real estate bonds, and U.S. commercial Real estate funds worthless recovery, maybe cryptocurrencies arent so bad after all?
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