Federal Reserve Policy & Economic Outlook - The Federal Reserve maintains a "wait and see" approach, with expectations of eventual rate cuts, but less aggressively than previously anticipated [2] - The market is data-dependent, with the possibility of the Federal Reserve not cutting rates this year [2] - Tariffs and higher oil prices could lead to underestimation of inflation [3] - A weaker labor market could prompt the Federal Reserve to move more quickly towards lower rates [11] - The market anticipates the Federal Reserve to act on data in September, considering inflation and employment data [13] Bond Market Dynamics - Investors require a higher term premium to hold U S debt [3] - Foreign buyers of Treasury bills are holding the line despite tariff concerns [6] - The 10-year Treasury is relatively attractive, while the 30-year Treasury above 5% would be interesting [18][19] - The treasury may change the dynamics around supply [20] - Single B bonds present opportunities for compression ahead [48] Credit Market & Investment Strategies - Credit spreads have recovered to pre-stress levels, with a preference for double B bonds over triple B bonds for excess carry [32] - Expectation of spread widening over the summer due to slowing growth data and the Federal Reserve remaining on hold [34][35] - Focus on high-quality fixed income due to uncertainty from tariffs, weather, and fiscal policy [36] - Mounting risks are being digested due to high starting yield levels, making fixed income attractive from a risk-adjusted perspective [39] - The market favors shortening duration and the belly of the curve (five to seven year) in investment grade [43][44] Specific Company & Market Events - X AI, Elon Musk's startup, is raising $900 million in debt and equity, offering sweeter pricing on the $5 billion debt part due to burning through $1 billion a month [31] - UnitedHealth and Enbridge had top deals, driving volume to about $18 billion [30] - Key economic data to watch includes the Consumer Price Inflation report and Jay Powell's testimony on Capitol Hill [50][51]
Fallout From the Fed Decision | Real Yield 6/20/2025
Bloomberg Televisionยท2025-06-20 19:15