Bottom line: as-expected Fed minutes and now market reaction.
I'm going to put the bullet points from Reuters newswires at the bottom of this update because none of it comes as a surprise or even constitutes "news" based on what we've already heard from the Fed or the fact that they cut rates at the last meeting. The bond market agrees, as volume and volatility haven't even changed enough to suggest the Minutes were released at 2pm ET.
10yr yields are still down roughly 5bps and Fannie 3.0 MBS are 2 ticks (0.06) below 'unchanged' on the day.
- MOST FED POLICYMAKERS BELIEVED 25 BASIS POINT CUT NEEDED; POINTED TO ECONOMIC OUTLOOK, RISK MANAGEMENT AND INFLATION OBJECTIVES
- SEVERAL PARTICIPANTS SAID STATISTICAL MODELS ON LIKELIHOOD OF RECESSION IN MEDIUM TERM HAD INCREASED NOTABLY IN RECENT MONTHS - MINUTES
- POLICYMAKERS GENERALLY MORE CONCERNED ABOUT RISKS ASSOCIATED WITH TRADE TENSIONS, GEOPOLITICS AND GLOBAL ECONOMY - MINUTES
- POLICYMAKERS SAID ALTHOUGH READINGS ON LABOR MARKETS AND OVERALL ECONOMY STRONG, CLEARER PICTURE HAD EMERGED ON WEAKNESS IN INVESTMENT, FACTORIES AND EXPORTS
- A COUPLE POLICYMAKERS PREFERRED A 50 BASIS POINT CUT AND STRESSED THAT FORWARD GUIDANCE MIGHT ALSO BE NEEDED
- SEVERAL POLICYMAKERS FAVORED KEEPING RATES STEADY, SAYING BASELINE ECONOMIC PROJECTION HAD CHANGED VERY LITTLE AND THAT UNCERTAINTIES WOULD NOT DERAIL EXPANSION
- A COUPLE POLICYMAKERS SAID A RATE CUT MIGHT BE TOO MUCH INSURANCE AND COULD LEAVE POLICY WITH LESS SCOPE FOR FUTURE SHOCKS
- SEVERAL POLICYMAKERS SUGGESTED GIVING MORE CLARITY ON WHEN FED WILL END THE RECALIBRATION OF RATE POLICY IN RESPONSE TO TRADE UNCERTAINTIES
- A FEW POLICYMAKERS SAID MARKETS SEE MORE FUTURE ACCOMMODATION THAN THEY SEE AS APPROPRIATE; MIGHT NEED TO BETTER ALIGN MARKET EXPECTATIONS WITH POLICYMAKER EXPECTATIONS
- POLICYMAKERS AGREED RECENT MONEY MARKET DEVELOPMENTS IMPLIED FED SHOULD SOON DISCUSS APPROPRIATE LEVEL OF RESERVE BALANCES 09-Oct-2019 11:00:01 AM - A FEW POLICYMAKERS NOTED THE POSSIBILITY OF RESUMING TREND GROWTH OF BALANCE SHEET TO STABILIZE LEVEL OF RESERVES
- SEVERAL POLICYMAKERS SUGGESTED CONSIDERATION OF A STANDING REPO FACILITY AS PART OF MONETARY POLICY IMPLEMENTATION FRAMEWORK
