BofA: Lessons Learned From the June Meeting

In BofA's view of the July FOMC meeting, "Powell attempted to guide the markets toward the eventual taper but did so without sending a hawkish message. Seemingly there were lessons learned from the June meeting."

• The messaging was that the next several meetings are "live" for a more explicit taper signal, with implementation shortly thereafter. "It is also possible that they shorten the timeline between the signal and start of the taper, pushing back the signal."
• The pace of MBS vs Tsy tapering is still a debate.
• Powell emphasized the distinct difference between the qualifications for tapering vs raising rates, "making it clear that liftoff isn't part of the conversation today."
• Re standing repo facility: "if banks can use the SRF to make Treasuries convertible to cash intraday, this could support higher bank Treasury holdings over time."