Jan 28.
Interest rate futures sold off in the wake of the FOMC statement. The curve flattened with red/gold pack spread falling over 6 bps. 30 yr bond future actually closed slightly higher on the day, in spite of an outside day with a lower close in tens. Ten year note continued to probe lower levels as Obama gave the State of the Union address, but has since retraced those modest losses. (from 117-19 to 117-14 and back). Having rallied throughout January, the ten year note is likely just pausing. Flatter curve probably due in part to Hoenig’s dissent with keeping rates low for extended period. FOMC also bluntly noted that bank lending is still contracting, though the statement was generally positive about growth. MBS QE still set to end this quarter. The Fed also affirmed (as expected) the end of other liquidity enhancing measures.
–News today includes Durables, expected +1.6% and Jobless Claims, expected 440k from last week’s spike to 482. Concerns about Greece (and Spain, which had a spike in CDS) continue to weigh on risk assets at the margin, though US equities were able to bounce into yesterday’s close.
