What Did The Fed Actually Change?

Here are the most notable changes:

  1. The vague notion of symmetric 2 percent inflation has been replaced with a specific goal of "moderately above 2 percent so that it averages 2 percent over time."
  2. They now refer to bond buying as fostering "accommodative financial conditions, thereby supporting the flow of credit to households an businesses"
  3. The Fed added that they're "prepared to adjust the stance of monetary policy as appropriate if risks emerge." 

That's about it!  Heading into the announcement, the list above served as a baseline for almost any prediction--a bare minimum taken "as read" before discussing additional/bigger changes.  

The remainder of their potential impact would have to be gleaned from the updated economic projections which will be discussed in the video in greater detail.

Econ Data / Events

  • 20min of Fed 30yr UMBS Buying 10am, 1130am (M-F) and 1pm (T-Th)

  • Retail Sales 0.6 vs 1.0 f'cast, 0.9 prev

  • Core Retail Sales -0.1 vs +0.5 f'cast, +1.4 prev

  • NAHB Confidence 83 vs 78 f'cast, 78 prev

Market Movement Recap
10:56 AM

10yr yields hit the lows of the day at 8:45am following a positive response to weaker Retail Sales data.  Bonds have weakened modestly since then, ultimately hitting the highs of the day at 10:25am.  Both Treasuries and MBS are still in positive territory on the day.  

02:08 PM

After 3-4 minutes of indecision bonds dipped into negative territory following the Fed announcement.  It's not a runaway sell-off though.  In fact, we're holding closer to unchanged-to-stronger.  If we're going to see a bigger move, traders may be waiting for Powell at 2:30.  That said, there wasn't much "meat" in this announcement. 

04:37 PM

Remarkably small reaction to what might have been remembered as a landmark Fed announcement.  After the initial volatility shook out, we're left with less than a 2bp rise in 10yr yields (and still very much inside the range).  MBS are down 1 tick (0.03) on the day.