Bond Market Update

Powell Speaks

• Fed Chair Powell (FOMC voter) in speech says downside risks to employment have shifted the balance of risks to achieving our goals; views policy rate of 4.00-4.25% as still being modestly restrictive
  • Two-sided risks mean that there is no risk-free path. If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 percent inflation. If we maintain restrictive policy too long, the labor market could soften unnecessarily. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate.
  • Policy is not on a preset course. We will continue to determine the appropriate stance based on the incoming data, the evolving outlook, and the balance of risks.
• Today's speech is largely a rehash of what he communicated at the September 17 FOMC press conference
• Yield check:
  • 2-yr: unch at 3.60%
  • 3-yr: unch at 3.58%
  • 5-yr: -1 bp to 3.69%
  • 10-yr: -1 bp to 4.13%
  • 30-yr: -2 bps to 4.74%