Morning Market Update: February 21, 2019

Treasury Yields Increase as Equities Rise on FOMC Minutes

Commentary for Wednesday: Treasurys sold off as equities increased. Yields were initially higher in quiet overnight trading and the early morning with no economic data releases but shifted lower following one Treasury auction. Yields jumped following the release of the FOMC's meeting minutes that revealed an uncertain path for interest rates and plans to announce a balance sheet runoff plan "soon." Yields were choppy the remainder of the session ending approximately one basis point higher across the curve. 

This Morning: Treasury yields are shifting higher despite the release of economic data that reported weaker-than-expected durable goods orders.

The Federal Open Market Committee (FOMC) released its meeting minutes from its January 2019 meeting. Overall, the minutes continued to emphasize patience due to uncertainty around financial conditions, slowing global growth, and softer inflation. Participants did however still characterize growth as "solid" and noted inflation "remained near 2 percent." Further, almost all participants felt it would be appropriate to announce a plan to stop reducing the Fed's asset holdings soon.

Following the release of the FOMC minutes, Fed Chair Powell spoke. He stated, "Many participants suggested that it is not yet clear what adjustments to the target range for the federal funds rate may be appropriate later this year; several of these participants argued that rate increases might prove necessary only if inflation outcomes were higher than in their baseline outlook." 

Financial Markets Research

The morning market update is provided by: 

solutionsheadshots_hotchkiss_smJames Hotchkiss
Director, Member Strategy and Solutions

SolutionsHeadshots_Deven_smMelissa Deven
Director, Member Strategy and Solutions


The data and valuations provided in this document are for information purposes only and are provided as an accommodation and without charge. The Federal Home Loan Bank of Chicago makes no representations or warranties about the accuracy or suitability of any information in this document. This document is not intended to constitute legal, investment, or financial advice or the rendering of legal, consulting, or other professional services of any kind.

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