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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FED
Heading into next week's FOMC, Deutsche Bank estimates that since September, US financial conditions have tightened by the equivalent of roughly 3 25bp Fed rate hikes.
- That's based on their analysis of the Fed's new Financial Conditions Index which is published with a lag (we'll get October's in mid-Nov).
- DB's model replicating the 3-year "lookback" index on a daily basis shows that the Fed's indicator would indicate a 60bp drag on growth over the next year, based on financial conditions since September. A 20bp increase is roughly equivalent to a policy-induced 25bp rise in 2Y Tsy yields - so DB argues the 60bp of drag is roughly equivalent to 3x 25bp hikes.
- The 10Y Tsy yield rise will have contributed to that most heavily, with effective Fed funds and mortgage spreads also adding to the tightening.
- Just like during the banking crisis earlier this year, expect Powell to be asked next week about how the FOMC is regarding the hike-equivalent tightening impact of financial conditions (recall in March he noted bank failures could equate to one or two hikes).
Source: Deutsche Bank
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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