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US TSYS: Marginal Rally On FOMC Minutes After Hawkish Backdrop

US TSYS
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  • Treasuries have pared a modest initial rally on the FOMC minutes with 2Y yields only 1.5bp lower post-release for +2.5bp on the day.
  • 2s10s steepens a touch to 4bps (+3.1bp on the day) and has reversed the dip into inversion since Bessent’s pick as Treasury Secretary at the weekend..
  • TYZ4 is at 110-07 (-10 on the day) off a brief post-minutes high of 110-10 as it hovers back close to the session low of 110-05+.https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20241107.pdf
  • No sign of some participants thinking it will ‘soon’ be appropriate to slow the pace of cuts: “In discussing the positioning of monetary policy in response to potential changes in the balance of risks, some participants noted that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated, and some remarked that policy easing could be accelerated if the labor market turned down or economic activity faltered.”
  • Neutral rate discussion somewhat stale after some hawkish points made by FOMC members since then: “Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually.”
  • We didn't see expectations re "some participants" looking at a 5bp decline in the reverse repo rate at upcoming meetings, although it's played as a technical adjustment to drop back into line with the bottom of the target range for the fed funds rate.

 

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  • Treasuries have pared a modest initial rally on the FOMC minutes with 2Y yields only 1.5bp lower post-release for +2.5bp on the day.
  • 2s10s steepens a touch to 4bps (+3.1bp on the day) and has reversed the dip into inversion since Bessent’s pick as Treasury Secretary at the weekend..
  • TYZ4 is at 110-07 (-10 on the day) off a brief post-minutes high of 110-10 as it hovers back close to the session low of 110-05+.https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20241107.pdf
  • No sign of some participants thinking it will ‘soon’ be appropriate to slow the pace of cuts: “In discussing the positioning of monetary policy in response to potential changes in the balance of risks, some participants noted that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated, and some remarked that policy easing could be accelerated if the labor market turned down or economic activity faltered.”
  • Neutral rate discussion somewhat stale after some hawkish points made by FOMC members since then: “Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually.”
  • We didn't see expectations re "some participants" looking at a 5bp decline in the reverse repo rate at upcoming meetings, although it's played as a technical adjustment to drop back into line with the bottom of the target range for the fed funds rate.