Group 1: Economic Outlook - The December FOMC meeting resulted in a hawkish rate cut of 25 basis points, with the policy rate forecast for the end of 2025 revised up by 50 basis points to the range of [3.75, 4.0]%[10] - The Fed's long-term policy rate expectation was adjusted from 2.9% to 3.0%, indicating a further compression of long-end rate cut space[10] - The PCE inflation forecast for 2024-2026 was raised, reflecting a more optimistic view on economic growth and inflation[19] Group 2: Market Reactions - Following the FOMC meeting, US Treasury yields rose sharply, with the US10Y surpassing 4.5%[25] - The FF market now anticipates 1.27 rate cuts in 2025, translating to a reduction of approximately 31.70 basis points, with a higher likelihood of rate cuts concentrated in the first half of the year[25] - The market's reaction to the Fed's hawkish stance has led to significant volatility in major asset classes, including declines in US stocks and gold[25] Group 3: Inflation and Employment - The potential impact of Trump's policies, including mass deportations and government employee cuts, may lead to sticky wage inflation in the second half of 2025[12] - The correlation between the effective federal funds rate (EFFR) and the expected real interest rate (E(RIR)) suggests limited downward movement in E(RIR) if EFFR decreases[11] - The anticipated labor market conditions in early 2025 could face negative shocks, affecting non-farm employment and wage inflation dynamics[49] Group 4: Fiscal Concerns - The ongoing reduction of US Treasury holdings by major foreign creditors, Japan and China, may exacerbate the fiscal deficit concerns and affect the actual term premium[13] - The upcoming debt ceiling discussions in early 2025 will be critical in determining whether Congress will raise or suspend the debt limit[49]
美债札记·三：鹰派降息落地，美债走向何方？
Tebon Securities·2024-12-20 08:23