In its policy decision today, the Fed was hoping to steepen the long end of the yield curve. The opposite happened as rates at the long end fell.
Note: The Effective Fed Funds rate will not be available until tomorrow. I estimate it to be 2.15 % down from 2.40% yesterday.
Interest Rate Spreads After the FOMC Announcement
Arrows indicate inversions.
In the following chart, I pay particular attention to the inversion between the 10-year note and the 3-month note.
Interest Rate Spreads Prior to FOMC Announcement
The spread between the 10-year note and the 3-month bill was a mere -1.3 basis points ahead of the announcement. It is now -7.1 basis points.
So much for the notion a rate cut would steepen the curve.
Yield Curve Following Decision
Following the decision the Rate Cut Odds Shrank Dramatically.
I don’t buy it. This is a recessionary reaction.
Expect more cuts than are priced in.
The bond market does not believe Powell’s “Mid-Cycle” Adjustment speech following the announcement and neither do I.
Mike “Mish” Shedlock