Treasuries continued their unrelenting November rally on growing speculation the Federal Reserve is done with interest rate hikes and will have room to ease policy next year.
The Fed is entering into its “blackout period” ahead of the upcoming Fed meeting, and officials are publicly confident that policy is well position to slow the economy and get inflation back to 2.0%
Fed swaps are now indicated over 100 bps of easing by the end of 2024. The FOMC is only suggesting 25 bps.
As noted earlier in the month, this is the seventh time in 18 months the markets have projected a change in monetary policy only to be disappointed by the stubbornness of inflation. Inflation has moderated from 9% but has remained stuck around the 4% range for the last 6-7 months.
Equities were mixed on Fed statements with many believing the markets are over extended.
Today revised third quarter GDP is released. Growth is expected to be revised to 5.0% from the previously reported estimate of 4.9%. Revisions are not expected in the inflation components of the report. Also released is the Beige Book or the statistical compilation utilized at the upcoming Fed meeting.
Last night the foreign markets were mixed. London was down 0.08%, Paris up 0.47% and Frankfurt up 0.97%. China was down 0.56%, Japan down 0.26% and Hang Seng down 2.08%.
The Dow should open moderately higher as the odds of a “pivot” increases. According to Bloomberg, bonds are rallying at the fastest pace since the onset of the Great Financial Crisis in 2008. The 10-year is up 7/32 to yield 4.30%.
Kent Engelke
Chief Economic Strategist Managing Director
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