NatWest's assessment of June FOMC: they say.....>

FED: NatWest's assessment of June FOMC: they say the outcome marginally lowers

prob. of near-term full scale QE, and lack of clarity means curve steepening:

- FOMC not announcing a more aggressive pace of buys weighted more heavily

toward the long end leaves uncertainty for market and avoids flattening

impulse/easing of financial conditions that might have come with formal QE.

- Leaves us wondering why the Fed has thus far been hesitant to press on the QE

gas pedal: may be they are simply waiting for clarity on the outlook or renewed

economic downturn, but with potential for YCC, maybe they are simply delaying on

balance sheet commitment until they get YCC in order. Also, they still have

further options for asset purchases down the road if more support needed.

- Without additional support for the long-end, we expect renewed curve

steepening. Fed didn't push back against bear steepening, may cause some to

wonder whether there is any Fed "put" embedded in rates.

- If they aren't concerned about financial conditions with 10s at 80bps and

unemp rate at 13%, will they be concerned with 10s at 1.00% and unemp rate

presumably considerably lower at the next meeting?